UK Expat Pensions, Pension Transfers and Self Invested Personal Pensions
Although you may be enjoying a high salary as an ex-pat, in many countries a pension retirement scheme is not a statutory requirement. As a result, it will be essential to ensure you have a robust pension plan in place for your retirement. Thankfully there is a range of specific expat pensions designed to help expatriates have more control and flexibility in their retirement planning.
There are many expat pension options available, and not all of them will suit you. We can offer expat pension advice from one of our experts to better navigate the often complex world of expat pensions. Our advisors will help you make the best choice for your pension plan, tailored to your specific situation, whether you're beginning your career or about to draw an income from your pension.
UK Expat Pension Schemes
Pension schemes are essentially wrappers which follow a set of rules and contain one or more investment funds. Pensions come in a range of shapes and sizes including (but not limited to) Defined Benefit Schemes, State Funded, Self Invested Personal Pension, Final Salary Schemes and Qualifying Recognised Overseas Pension Scheme – with QROPS being specifically for people who no longer live in the UK.
Pensions carry certain tax advantages over traditional savings, but also follow the specific guidelines set by HMRC as to how they can be used. A SIPP and QROPs is no exception.
One of the main tax advantages of pensions for expats is that the money which is paid can be done so before income tax is taken off, meaning that if you wanted to pay £100 into a pension scheme and you were a basic rate taxpayer, in real terms it would only cost you £80 as the remaining £20 would, in essence, be paid by the government. The higher the rate of tax you pay, the less it costs to pay into a pension scheme.
Funds held in a pension are typically available once the holder of the pension reaches 55 years old, but can sometimes depend on the type of scheme. Once you decide you wish to take funds from your pension, you are able to take it in a lump sum(s) – where the first 25% of each lump sum is tax-free, or as an income over a regular period.
Any money drawn from a pension is considered income and is taxed as such. Therefore, whenever you take money from a retirement fund, you should seek advice beforehand to ensure that you are doing it in the most tax-efficient way.
What We Offer Our Clients - Pension Transfer Schemes
- Defined Benefit Pension Transfers to QROPs or SIPPs
- Defined Contribution Pension Transfers to QROPs or SIPPs
- New Pension Plans For Overseas Residents and UK Expats
- Transfer Your Existing Expat Pension Plan From Another Overseas Pension Provider
- Re-Balancing the funds Of Your Existing Individual Pension Funds
- Transfer Your Existing Offshore Investment Bond From Another Overseas Provider
- Re-Balancing Of Your Existing Offshore Investment Bond Funds
- Transfer Your Existing QROPs or SIPP From Another Overseas Provider
- Re-Balancing Of Your Existing Offshore QROPs or SIPP Funds Into Better Performing Funds
Benefits Of Transferring Your UK Pension
Guarantee YOUR family get 100% of your pension
With a Defined Benefit pension, a spouse typically gets 50%. Children over 21 or 18 and working get 0%. Transferring to an Expat Pension means you not only choose exactly who gets the fund, but also how much, and exactly how they get it—a lump sum or an income
It's the best protection against pension fund insolvency
1/3 of UK final salary schemes have gone bust already & more will continue to do so. A Personal Pension isn't reliant on a company's ability to fund it from revenue—so you can be certain that your pension survives
You can even receive the same pension income (AND remove the risk of your employer going bust)
Simply make the exact same investments that your existing pension trustee is in, all with no reliance on your employer remaining solvent. Plus, you'd get all the additional benefits.
Protect your life earnings from the taxman
With a Defined Benefit Pension, the income tax you pay is defined for you. With a Personal Expat Pension, you choose how & when you pay tax.
It's so flexible, that you can access tax-free cash now
A Defined Benefit Pension pays you a monthly income. With a transfer, you can get 25% of your Cash Equivalent Transfer Value (CETV) as a tax-free cash lump sum right now—helping you pay off that mortgage, travel, or help your children get on the property ladder—the rest will go into your Personal Pension
It's so flexible, that you can get earlier access to your pension
The normal retirement age is fixed at 60 or 65 & if earlier retirement is an option, it will result in a penalty. A Personal Expat Pension means you can access your pension from 55 years old with no penalty
In Short Transferring Your Pension Has Many Benefits For Expat Pension UK Clients
- Access their 25% tax-free lump sum at the age of 55
- Guarantee their spouse 100% of their pension
- Access their pension from 55
- Reduce their income tax
- Mitigate Lifetime Allowance taxes
- Consolidate all their pensions
- Potential to pay no Income Tax charge in the event of death
- Access to a large range of global investment funds
- Ability to consolidate multiple historic pensions
- No charge on lifetime allowance; the amount you can save tax-free into your pension
- The ability to leave your pension to a beneficiary of your choice
- Payments in any major currency, thereby eliminating the impact of exchange rates
Why A UK Pension Transfer Might Be Suitable For You!
Reliance: You will not be reliant on the pension income payable by the DB scheme because your DB scheme pension rights represent only a small percentage of your overall pension rights and/or you have substantial other investments
Investment choice: You prefer your pension assets to be invested in line with your agreed risk profile.
Early retirement: You have an immediate need for income and/or a tax-free cash lump sum but the DB scheme won't allow early retirement.
Tax-free cash: The tax-free cash lump sum that can be paid at retirement following the transfer to a DC scheme may be higher.
Income flexibility: You want to take benefits via income draw-down in order to benefit from maximum flexibility in terms of how often, and how much, income you can withdraw. The amount of income you withdraw can be made in sync with any fluctuating income you may have from other investments and/or other employment or self-employment and could therefore be a useful tool for managing your liability to income tax.
Higher-income: In some circumstances, for example, if you suffer from ill-health or are single, you may be able to get a higher income by buying an annuity with your transfer value than you can get by taking an income from your DB scheme.
Death benefits: Unlike pension death benefits paid from a defined contribution (DC) arrangement which can be paid to any nominated beneficiary, DB scheme pension death benefits can only be paid to a dependent (such as a surviving spouse or civil partner) and following their death there is no option for the pension death benefits to be passed on to the next generation.
Value for money: Transfer values are historically high at the moment due to low gilt yields and even if you are single the transfer value offered will still normally include allowance for a spouse's pension.
Why A UK Pension Transfer Might Not Be Suitable For You!
Reliance: Your DB scheme pension rights represent a significant percentage of your overall pension rights and you don't have substantial other investments to fall back on.
Investment choice: If you remain a member of the DB scheme no investment decisions need to be made but if you do transfer, your chosen investments will need to be regularly reviewed to manage returns and volatility.
Income guarantees: You will give up guaranteed inflation-linked income in retirement. Survivor's pension: If you are married or in a civil partnership you could be giving up a potentially valuable survivors pension, especially if your spouse or civil partner will not have sufficient provisions of their own.
Income flexibility: If you do enter income drawdown, then the ability to draw as much or as little income as you want, whenever you want, can be a useful tax planning tool. However, this new 'pensions freedom' brings temptation and your retirement fund could be depleted quickly if you draw too much, too soon.
Lower income: If the invested fund performs poorly you could be much worse off in retirement than you would have been had you not transferred.
Death benefits: If the payment of death benefits is important to you, it might make more sense to review your protection policies to see if a life insurance policy could meet this objective without forgoing the security of your DB scheme pension promise.
Working With UK Expat Pension Reviews
Dealing with ex-pat pensions can be a complex process, especially if you are trying to relocate your career, family and life overseas. Our team of financial planners have many years of experience in dealing with expat pensions, tax and retirement.
To discuss your plans in more detail please contact your nearest office.
Please note, that this table is not exhaustive and there may be other reasons, on both sides, for approving or rejecting a pension transfer request.
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