Expat Pensions and Transfers
Transfer and Consolidate your UK Pensions
New UK pension legislation introduced in 2006 permits owners of defined benefit pensions to transfer and consolidate their assets into alternative schemes.
Greater access, investment choice and the ability to pass on assets to loved ones after death can now now enjoyed by retirees, however, although these changes have proved beneficial for thousands of pensioners, pitfalls exist so receiving regulated advice has never been more important.
Since the introduction, scheme members are becoming increasingly knowledgeable as news of spiralling pension deficits and the risk of intervention by the Pension Protection Fund has been enough to motivate people to seek advice and explore their options.
Pensions are simply pots of money used to provide an income when you are no longer working, creating funds to draw on to give you a comfortable lifestyle. This crucial part of financial planning comes in two forms:
Defined benefit schemes are linked to salary and length of employment. The schemes are administered by trustees that ensure that contributions are made by employers. Defined benefit pensions are generally being replaced by money purchase schemes as they are expensive for employers to maintain.
Money purchase schemes are not correlated to length of service, although longer service will mean more contributions. Employees and employers contribute to a pension pot and funds are invested into securities, the performance of which will determine the value of the pension at retirement, less charges deducted.
When exploring pension transfers as an expat, the options you'll be given relevant to your circumstances will usually include:
It is important for expats to note that as non-relevant UK individuals with relevant UK earnings, tax relief on contributions into a SIPP may not apply. UK taxpayers will normally receive 20% government tax-relief on contributions (possibly more for higher tax rates), as long as they don't exceed:
£1.055 million in your lifetime (current lifetime allowance)
100% of your earnings in a year
£40,000 a year (annual allowance)
Globally, financial regulations differ as much as the protection they offer you, and many regions are still a long way from implementing UK style remuneration rules for expat advisers. The way you pay for expat financial advice has a huge impact on investment performance and the service you receive, so it's vital to clearly understand the terms and conditions of financial commitments you make, and consider how products will fit your needs should your circumstances change.
Caution is also advised as the UK government's efforts to deter cold-calling scams and the promotion of unregulated investments, has not stopped millions in pension assets being lost by inexperienced and vulnerable investors.
The requirements for pension transfers have gradually strengthened but care is needed. The benefits of moving a pension are many, however, sacrifices are involved that need to be clearly explained and understood.
To discuss the benefits of expat pension transfers to a QROPS or an International SIPP, and if it is right for you, contact us today and you'll get the guidance you need to make an informed and educated decision.