Revealed: Labour’s little-known tax raid on pensioners retiring abroad – The Telegraph

Pensioners planning to retire in Europe face losing 25pc of their savings after Rachel Reeves moved the goalposts on tax.

Savers could previously transfer up to £1,073,100 of pension funds to most European countries tax-free. Thousands of people rushed to make the switch, with some benefitting from a loophole that allowed them to draw extra tax-free cash.

But in her maiden Budget, the Chancellor left pensioners’ plans in tatters when she slammed the door shut overnight, with ex-soldiers particularly affected.

In 2017, the Government introduced the overseas transfer charge to stop people reducing their tax bill by moving their pension abroad. Transfers triggered a 25pc penalty.

However, this changed when the lifetime allowance – a cap on how much people could hold in their pension before a tax charge was levied – was abolished.

Jeremy Hunt removed the charge in 2023, before fully abolishing it in April 2024, partly in a bid to stop wealthy doctors retiring early. Labour immediately pledged to reinstate it, but U-turned shortly afterwards.

In its place, the Conservatives introduced three new measures, including the overseas transfer allowance.

This allowed people living in the UK or the European Economic Arena to avoid the 25pc charge on transfers up to £1,073,100, provided the funds went to a “qualifying recognised overseas pension scheme”, or QROPS, within the European Economic Arena or Gibraltar.

The changes also created a loophole where people could take up to £268,275 tax-free from their UK-based pension, then another lump sum from their funds abroad.

The number of transfers doubled last year as people sought to benefit, with more than 7,000 savers sending over £1bn to overseas schemes.

However, Ms Reeves changed the rules during her October 30 Budget – with immediate effect. People now have to be resident in the same country as the QROPS they’re transferring to if they want to escape the charge.