A 9.7 per cent reduction in transfers made under the ‘QROPS’ regulations could be attributed to a Treasury-led crackdown, according to AJ Bell.

In the tax year between 2008/9 and 2009/10, there was a 9.7 per cent reduction in transfers under the QROPS scheme, figures show.

The pension company has told investors that a Treasury-led initiative to stop UK-domiciled individuals using the ‘QROPS’ pensions rules to avoid tax while living in the UK is potentially the reason.

Qualifying Recognised Overseas Pension Scheme (QROPS) transfers were designed to allow UK residents moving abroad to transfer their UK pension benefits without incurring an unauthorised payment or scheme sanction charge from HMRC.

However, AJ Bell said investors should be aware that the government has grown wise to UK residents using these rules with no intention of emigrating.

Treasury figures obtained by A J Bell found the volume of QROPS transfers have fallen from a high of 6,263 in 2008/9 to 5,659 in 2009/10.

The self-invested personal pension (Sipp) provider says it now expects this number to fall further in 2010/11 and to see another fall in 2011/12 following changes to the UK framework and the rules surrounding overseas transfers.

The company said a further clampdown by the Treasury on the use of overseas pension schemes by individuals remaining in the UK was to be expected and the introduction of flexible drawdown to accelerate the fall in the number of QROPS transfers would follow suit.

Billy Mackay, marketing director at AJ Bell, said this change will have little impact on transfers to QROPS for individuals retiring overseas.

He added, ‘The issue which clearly concerns the government is the promotion of QROPS as a tax avoidance vehicle to individuals who have little or no intention of leaving the UK.

‘The fall in the number of QROPS transfers provides evidence that changes to the UK pensions framework such as the reduction in the tax charge applied on lump sum death benefits from the funds of individuals over 75, and the introduction of flexible drawdown were already hitting the popularity of these transfers and we expect this to continue.’