A QROPS loophole, where a member can take double tax free cash, highlights the problems in pension legislation, according to a pension specialist.
Aries Pension and Insurance Systems (Aries) has found in some circumstances, a UK resident can take one sum of tax free cash before they transfer into a QROPS and again after moving their pension back to the UK.
Gary Chamberlin, director of Aries said: "We are not suggesting there will be a sudden yoyo effect, with lots of scheme members scrambling back to our shores after indulging themselves with a year or two of southern weather - but it does highlight the fact loopholes continue to plague pensions legislation, despite the best efforts of the authorities to plug them. "
The loophole has occurred because a QROPS does not have to identify incoming crystallised funds. When the QROPS is transferred back, the receiving scheme could assume the fund is crystallised and provide a pension commencement lump sum to the member.
Aries has said while this is contrary to the policy intention set out by HMRC in April, it is legal. As a result, it would need further legislation to remove the opportunity.
Chamberlain said such loopholes exist due to constant tinkering with pension legislation.
He added: "There is the fact that UK DB schemes have constantly evolved their structures over the years, to meet new contingencies and provide a wider range of benefits for their members.
"But another factor is the approach of the UK authorities themselves, who - despite their claims to "simplify" - have over the years created a uniquely complex structure for pensions via FA 2004 and a succession of Pensions Acts. So we rather feel that, in this case, the authorities are hoist by their own petard."
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