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."
What made financial headlines over the weekend?
The chairman doggedly tries to be amusing
'Profitability is almost a myth'
Active Wealth in liquidation
Cautious welcome for volatility