There were 13 overseas transfer charges paid to HMRC in 2019/20 from pension transfers to Qualifying Recognised Overseas Pension Schemes (QROPS), a 46 per cent fall compared to 2018/19, a freedom of information request from Canada Life has revealed.

This equated to £1,001,876 in charges in 2019/20, which Canada Life emphasised was “dramatically lower” than the £60m the government expected to raise each year by 2021/22 when it introduced the charge in 2017.

However, the firm clarified that whilst the number of transfers has steadily fallen since 2017, the value of these overseas charges had risen compared to the previous year due to the size of the transfers made.

In 2019/20 for instance, there was a 32 per cent increase in the total value of charges levied compared to 2018/19, when 24 transfers attracted charges totalling just £780,846.

The 25 per cent transfer charge was originally introduced in the Budget of March 2017 and applies to certain pension transfers to QROPS.

Broadly speaking, the transfer charge applies unless the member is resident in the same country in which the QROPS is established, or the member is resident in a country within the European Economic Area (EEA) and the QROPS is established in a country within the EEA.

According to the HMRC data, the number of pension transfers to QROPS peaked in 2014/15, with 20,100 transfers valued at £1.76bn, reducing “considerably” over the following years, with just 4,400 transfers worth £550m recorded in 2019/20.

Commenting on the data, Canada Life technical director, Andrew Tully, stated: “The charges levied on certain pension transfers overseas has effectively done the job in limiting the appetite for moving pensions outside the UK to destinations other than the EEA.

“We’ve witnessed a steady fall in QROPS transfer activity since the peak of 2014/15 and this has only accelerated following pension freedoms and the introduction of the transfer charge.

“Despite the number of pension transfers attracting a charge being very small, and therefore the amount of tax raised as a result very low, Treasury will be pleased another tax loophole has effectively been closed and further tax leakage prevented.”

HMRC has been contacted by Pensions Age for comment.

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