What is Flexi-Access Drawdown for expats?

Flexi-access drawdown is a pension solution that allows you to access your pension fund whenever you like, however you like. Any monies not withdrawn can be reinvested in the right portfolio for your specific needs. This might be capital growth, or income generation. Flexi-Access Drawdown for expats differs, in that as a non – UK resident there are other factors to consider/negate in order to gain flexible access. Within this article, we will assess the pros and cons of flexible access as well as the solutions specifically created for expats.

Flexi-Access Drawdown for expats – Background

Under the Pensions Freedom’s Act, created 6th April 2015 anyone who holds a personal pension and is over the age of 55 can access their pension pot. The initial 25% of this will be tax-free (in the UK, other countries can and do tax this payment) with the remaining monies being taxed in line with income tax. Prior to this, you had an option called Flexible drawdown which required you to have a minimum income from other sources.

Flexi – Access Benefits

• Ability to take 25% (PCLS) of your entire pension pot as a lump sum or partially
• Allows you to invest the remaining monies specifically for your needs whether it be income generation, capital growth, capital preservation unlike an annuity which only offer a guaranteed fixed income
• You can take your pension income in any way you like. Such as annual lump sum or monthly income. In essence, giving you total control over your investment
• In the event of death 100% of the pension, the value can be left to your beneficiary of choice

Flexi – Access Disadvantages

• Due to the ability to access your monies as you like, you can deplete your retirement pot and risk running out of money in later life
• Unlike an annuity which offers a guaranteed income for life the value can go and up and down which again leads back to the risk of not having enough money to survive in later life
• After you have withdrawn your 25% tax free amount, if you are still wanting to contribute you are limited to £400o per annum (prior to this the maximum is £40,000)

Flexi-Access Drawdown for expats

The issue most ex-pats have with their UK pension scheme is that they do not offer flexi access to a non-UK resident. Although most providers do offer their own flexible access scheme, which they state you can transfer into for flexible access, upon request to do so you can not able to. As such the majority of expats will need to transfer out of their scheme in order to gain flexible access to their monies. This does however off certain advantages.

Key advantages of utilising a specific non-resident pension scheme:

• Full flexible access including tax free lump sum of 25%. (tax free in UK) Tax may be applicable depending on the rules and regulation of where you reside
• Ability to hold and invest in all major currencies. Thus negate currency risk of investing in GBP and living/spending in another
• Access to unlimited fund range (all fully UK or European regulated)
• Ongoing management of your pension plan
• Ability to retain FCA (Financial Conduct Authority) regulation

Flexi-Access Drawdown for expats – What next?

The first move should be to contact a regulated, independent, financial adviser.  They can discuss your requirements and the possible solutions with you before deciding the best route forward.

Harrison Brook was born out of a desire for greater transparency in the offshore world of Financial Advice. For years, a lack of rules and regulations has allowed for commission-based
investments, confusing fees, and poor client servicing. Our mission is simple – to bring the highest standard of regulated advice to Expatriates. No commission payments, no lock-in periods, no ties to products or providers. We are proud of our independence. Our goal is to create strong, long-lasting relationships with our clients. Speak to a pension expert today to discuss the options available to you.

FAQ’s

What is capped drawdown

A detailed explanation of the different types of drawdown can be found here 

How much does it cost to transfer my pension?

A detailed explanation assessing pension transfer costs can be found here 

How does pension drawdown work?

A guide to how drawdown works can be found here

What is my UK pension is frozen?

An article exploring Frozen pensions and the options available can be found here