One very good reason to move abroad is that you can potentially earn a better salary, and/or make your earned income go far further thanks to additional fiscal benefits such as lower taxation and a more affordable cost of living. However, of big concern to working age Britons who relocate is ‘what should I do about my pension?’
If you already have pension savings in the UK in for form of a company or private pension, are you wise to take such benefits offshore with you in the form of a pension transfer, or should you leave what you have well alone and start a brand new pension overseas?
In the past pension mis-selling has created scandals and headlines, therefore it’s only natural that any expatriate Briton will want to tread very wearily and carefully when it comes to ‘offshoring’, paying up, transferring or freezing their pension. In this report we look at whether expats should ever offshore their British pension or not.
The very first thing to mention is that this article does not constitute advice – when it comes to any financial decision, especially one involving your potential retirement income, you have to seek qualified, regulated independent financial advice pertinent to your personal circumstances. Any facts or opinions contained in this article are for general information purposes only, to highlight potential options open to some expatriates.
If you’re thinking about moving abroad for anything less than five years, it may make little sense to disturb any pension you already have in the UK. What’s more, if your onshore (i.e., your British) pension is worth less than £50,000 or £60,000 it may also not be worthwhile considering taking it offshore when you move abroad.
However, if you’re moving abroad for the longer-term, you’re certainly planning on retiring abroad, you have a substantial pot saved in the UK which you won’t get any more tax benefits from once you relocate, it may be worthwhile considering ‘offshoring’ your pension.
The financial solution most often utilised today for taking a British pension offshore is a Qualifying Recognised Overseas Pension Scheme or QROPS for short. The good news is that these are schemes generally backed by the British government and HM Revenue and Customs as long as they adhere to their guidelines, and they really do offer qualifying expatriates an exceptional list of potential benefits!
Note: not everyone is able to benefit from QROPS, and as a result, not everyone should offshore their pension. As stated you categorically have to have personal advice from a qualified and regulated financial adviser.
Some of the general benefits potentially available to you if you do decide to offshore your pension with QROPS are as follows: -
- You are under no obligation to purchase an annuity with your pension
- This means your estate does not lose any unspent money when you die, your unspent money can be left to your beneficiaries
- In terms of investment allocation, you can access a diverse range of underlying investments via your QROPS, making it possible to diversify according to your risk profile and/or desired investment goals
- QROPS allow for a larger tax free lump sum withdrawal than an onshore British pension
- Depending on where your QROPS is invested, where you retire and tax rules and treaties in place between the relevant nations, there is the possibility of paying low or no income tax on your pension via a QROPS as an expat
- Charges and fees can be competitive
- Potential asset protection benefits
- Currency diversification benefits
If you would like to enjoy these benefits, you’re an expat already or you’re planning on moving abroad and intend to remain outside the UK for at least 5 years and you have over £50,000 squirreled away in a pension you’ve not yet drawn down from, you really should take the time to explore your pension options. Ensure you do so with a qualified financial adviser who is regulated to advise expats in the jurisdiction in which you live, who is independent and trained to advise on pension transfers and QROPS.
If you would like us to put you in touch with such an adviser who may be able to help, get in touch with us and we’ll give you the contact details of an offshore financial advisory which may be able to assist you. Alternatively, take personal recommendations, or do your research and due diligence on any individual or company you consider working with to ensure they fulfil the above criteria.
Don’t take risks with your retirement savings, but you do owe it to your pension to ensure you’re making the most of it. If in doubt, always get a review and some qualified advice.