Latvian pension transfers highlight QROPS abuse: A J Bell

Latvia's top ten ranking for pension transfers from the UK in 2009/10, despite few British expats retiring there, suggests the country is being used to abuse tax loopholes, AJ Bell said.

The Baltic nation was the most popular country for qualifying recognised overseas pension scheme (QROPS) transfers from the UK, excluding countries where English is the first language.

The figures were obtained by AJ Bell from the Treasury under a freedom of information request.

However, a survey of British expats conducted by Natwest in April did not list Latvia as a top location for retirement.

Gareth James, technical marketing manager at AJ Bell, said the fact Latvia is not a popular retirement spot suggests QROPS based in the country were being used as tax loopholes.

"Unless Latvia has suddenly gained in popularity as a destination for British expats, I think most would be surprised to hear that it was more attractive as a home for QROPS transfers than long-established expat locations like France or Spain," said James.

"This is just one of a number of examples which supports the view the Treasury is right to focus on the possibility of abuse in this area."

An HMRC spokesperson refused to confirm if Latvia had been a particular focus in its campaign against tax abuse, but said: "HMRC will continue to keep the whole of the QROPS regime under review."

In 2010, Latvian QROPS came under scrutiny when the Wenn International Pension Scheme, which is based in the country, was removed from HMRC's list of approved QROPS.

The scheme was recommended by Windsor Pensions, a firm without FSA authorisation which states it represents various QROPS. On its website it said its services should not be used by UK residents or in place of financial advice.

The Wenn scheme was being used by service personnel to immediately cash their pensions. However, the Service Personal and Veterans Agency banned all transfers of armed forces pensions into the Latvian schemes after requests to move into the Wenn scheme increased from 30% to 150% between March and May 2010.