If you have savings in an existing UK pension fund but are considering retiring abroad, you may be wondering just how easy it will be to access these funds. The dreams of a more relaxed lifestyle or the attraction of lower tax could soon fade if you have to work around pension rules more relevant to UK. A UK pension transfer might be best for you.
Is a QROP or a SIPP right for me?
QROPS (Qualifying Overseas Pension Schemes) or SIPP (Self Invested Personal Pensions) allow for the transfer and consolidation of UK pensions to a single personal pension structure. This includes UK frozen pensions.
However, if you already live outside the UK, or you’re planning to move overseas shortly for a period of five years or more, you can use a QROPS and a UK Pension Transfer to move your pension arrangements abroad. If your intention is to retire in the UK a SIPP structure could be more suitable. It is important to understand which pension solution will be best for your situation.
What are the benefits of a UK Pension Transfer for an Expat?
- Consolidate several pensions into one pot/place (Including personal & employee based schemes)
- No annuity purchase necessary
- Full flexi-access drawdown (full pension access) available on all SIPP and certain QROP schemes
- A QROPS or a SIPP can provide for your family, it is possible to use up to 100% of the fund to provide a spouse’s pension
- 100% of pension pot can be left for beneficiaries
- Wider range of investments to choose from – for capital growth or investing for generating income
- Tax free lump sum (25%)
- Death Tax requirement has been removed (55% or 45% tax) for under 75 year olds and from April 2016 for over 75 (SIPP)
- Receive pension income free from UK income tax (QROPS)
- Low cost charging structures (Harrison Brook work a on fee basis of advice rather than a commission model – only accept transparent charging structures)
Peter, 53, and his wife Julia, 51, have lived in Qatar since 2010 and don’t want to return to the UK. Peter originally had a pension fund of just under £400,000 in a UK pension scheme and has now transferred it to a Maltese-based QROPS. Peter invests his pension funds in a diversified portfolio, appropriate to his tolerance for investment risk and required returns. The portfolio is denominated in Euros to reduce currency risk, as his goal is to retire in Spain. In 2016, when they find their ideal retirement Villa in Spain, Peter can draw up to 25% of his fund as a tax-free lump sum to pay for their new home. The other 75% they will use flexi-access drawdown (no requirement to take an annuity) to drawdown monthly income, but also they have complete flexibility how much and at what frequency. They can also take regular cash lump sums as and when required in retirement. As Malta and Spain have a ‘Dual Taxation Agreement’ (DTA) in place, income payments/withdrawals are paid out gross of Maltese taxation.
How do I choose which UK pension transfer is best for my situation?
The important first step is to get started with a regulated cross border financial adviser for the correct guidance. When you’re making major decisions about your financial future as an expat, you don’t want any nasty surprises. A good financial adviser will be open and upfront about the cost of their service. Whether you opt for a fee or a commission based model, the charging process should be clear and transparent, and the initial consultation should always be on a no-obligation, no-fee basis.
The success of any business can be measured by the number of satisfied customers, so don’t be afraid to ask for references and testimonials. A good financial adviser will have clients who have been with them for years, and who are happy to recommend them to friends, family and new customers.
Any financial adviser you use should be fully regulated to the highest standards, both locally and globally. Make sure that the advisers you deal with are experts. They should be happy to give you the details of their experience and expertise. You might want to check, for example, whether they have a UK Level 4 Diploma, the benchmark qualification for anyone working as a financial adviser providing expat financial advice.