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 scheme is not a statutory requirement. As a result, it will be essential to ensure you have a robust pension plan in place. Thankfully there is a range of specific expat pensions designed to help expatriates have more control and flexibility in their retirement planning. These schemes are notably different from UK private pension schemes. An expat pension often has no minimum age to draw income and entire asset withdrawals in cash is also an option.
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.
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 Can We Offer Our Clients
- 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 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
Expat Wealth Management
We help ex-pats based overseas with a range of expat wealth management, retirement planning, financial planning, investment portfolio reviews, and investment services to help them plan for their retirement. We offer individual wealth management and financial planning advice which is personally prepared to each individual as we understand that every person’s circumstances are different. We advise on Investment Funds and Pension Funds Transfers into QROPs and SIPP. We also help clients with Expat Mortgages and all types of Insurance such as Life Insurance and Medical Insurance. We also have links with UK property developers so if you are looking to create a new property portfolio of UK Investment Property without returning to the UK we can be of help. Our developers have new build-off plan properties or existing built properties available for our clients.
Investment Funds and Portfolio Reviews
As a pension transfer specialist, our main focus area is helping UK Expatriates to review their pension funds and investment portfolios to see if it may be worthwhile to switch them around to better-performing funds after they have performed a pension transfer. If you haven’t yet transferred your UK pension that’s fine we can guide you through the pension review process to see if it is worthwhile. The Pension Transfer Benefits can make all the difference between retiring happy with a great pension pot or retiring with an undervalued pension pot meaning a lower standard of living.
The investment funds can be held in various tax wrappers such as:
Q.R.O.Ps – Qualified Recognised Overseas Pension Scheme
S.I.P.P – Self Invested Personal Pension
Offshore Tax-Free Investment Bond.
How Can We Help Our Clients – 3 OPTIONS AVAILABLE
1: LEAVE YOUR INVESTMENT FUNDS AS THEY ARE.
The charges and costs of your current fund provider and the investment wrapper it is held in are competitive and do not warrant changing so there is no need to change any of the funds around. This rarely happens as investment portfolio funds are like individual stocks in that they only perform a certain amount of time before they need to be changed to suit the current market conditions.
2: CHANGE INVESTMENT FUNDS – High OR Expensive Charges
The charges in your current pension plan are high or expensive which will have the effect of reducing your pension pot value. We can help you choose from an existing pre-selected portfolio of funds dependent on your attitude to risk which will help your retirement pot to grow faster and offer increased funds for your retirement. The selected funds for your pension may not be growing at present or may be left dormant so the funds are not producing good returns. As above investment funds are similar to single stocks in that they may not always perform so switching funds regularly is vital to keeping the pension fund performance optimal and growing.
3: Re-balance Portfolio Or Change Whole Portfolio
Re-balancing involves the selling of any mutual funds, ETF’s or stocks that have not performed well. We take these funds and reinvest them elsewhere to help keep the portfolio on track to achieve its pre-determined objectives.
Investment is cyclical in nature and asset types (shares, bonds etc.) come in and out of favour as do investment styles (high yield shares have historically performed well in tougher market environments but have lagged in periods of explosive market performance).
A portfolio that is not re-balanced risks having maximum exposure to a style or area of investment just before it falls out of favour and minimum exposure just before it comes back into favour. Regular re-balancing helps investors to take advantage of the ebb and flow of investment fashion. Given the low cost of rebalancing it makes sense to keep portfolios in line with the investors’ chosen mix of assets and associated risks.
PRE SELECTED FUND PORFOLIOS
We have existing relationships with some of the best portfolio managers in the asset management industry that are constantly evolving their portfolio selections and keeping them at optimal performance to keep client portfolios performing their best.
Using our automated software we can transfer clients into pre-defined and pre-prepared portfolios with minimal of fuss.
Growth Portfolios – For Younger Investors
- Conservative Growth Investment Portfolio.
- Balanced Growth Investment Portfolio.
- Adventurous Growth Investment Portfolio.
Income Portfolios – For Older Investors or Retired Individuals
- Conservative Income Investment Portfolio.
- Balanced Income Investment Portfolio.
- Adventurous Income Investment Portfolio.
We can improve your investment returns by help helping you :
- Paying fewer fees
- Remove surrender or early access penalties
- Align your asset allocation to your risk profile
- Utilize Discretionary Management
- Use properly regulated funds and ETF’s
- Ensure your structure is tax optimized for retirement.
How can I keep track of my investments After An Expat Pension Review?
We help clients keep track of their portfolios with the following:
Monthly investment valuation emails so clients can see their monthly portfolio balance and any changes that month.
The latest smartphone app so you can check your portfolio any time of day or night.
Regular servicing reviews every twice a year with an experienced investment adviser. Either online or face to face.
The latest online fund switching software to switch any funds within the client’s portfolio to enable easy fund changes.
Access to top fund manager portfolios that are performing best in current market conditions
Why a pension transfer might be suitable
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 pension transfer might not be suitable
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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