Many expatriates quickly learn that an onshore pension is not necessarily the best place for them to stash their cash towards retirement once they become non-resident for income tax purposes in the UK. The reason being, the only ‘perk’ left with a pension is lost to you as soon as you lose your tax status in the UK.
I.e., you are no longer eligible for pension tax relief when you expatriate – so there is pretty much nothing good about a UK pension for Brits living abroad. Knowing this fact means that it’s quite striking when you hear an onshore pension expert also seriously questioning the ‘value’ and ‘worth’ of this type of retirement savings vehicle.
The director-general of the Centre for Retirement Reform, which is an independent think tank, has stated categorically that: “I’m beginning to think that saving into the current pension proposition might be fifth or even sixth on the list of vehicles to consider.” So, expatriates, what are your options now? We take a closer look.
If you’ve already been contributing substantially and significantly into an onshore pension scheme in the UK and you’re now resident abroad, plan to retire abroad and are paying tax abroad, you may like to consider transferring in to a qualifying recognised overseas pension scheme or QROPS. These schemes are fantastic for many people and for many reasons - such as the fact you do not have to buy an annuity with them, you can perhaps reduce your tax liability in retirement with them and they can be quite flexible.
However, QROPS are certainly not ideal for everyone and transferring a pension carries costs and risks so you have to have personal advice to determine whether this path is right for you.
As an expatriate you have access to the entire world of offshore opportunities – so you can begin by exploring your options with an adviser. It may be that you have shorter term objectives as well as your long-term pension planning objectives too…so these will all need to be looked at to find the right savings path for you.
You can save and invest offshore, taking advantage of different markets, currencies, assets and equities, fund managers, funds, jurisdictions and rates of interest. You can diversify so you avoid being tied to ever falling annuity rates – as onshore pensions savers are – and you can avoid being trapped in one scheme or on one path towards your retirement income.
Remember that you have to have personal advice that is appropriate for you and your objectives. For more information and to find an adviser to help, please get in touch.
