Labour won by a landslide in the UK general election last week. They now command a large majority in the House of Commons. This will allow them to pass new legislation with less opposition. So what does the Labour election win mean for your UK pensions as an expat?
Below we will look at some of the pledges the Labour party made in the run up to the general election.
State pension triple-lock
Firstly, Labour has committed to keeping the ‘triple-lock’ for state pension increases. This means for most people their state pension payments increase each year in line with the highest value of either average earnings, inflation, or 2.5%. For expats, this is not necessarily the case. You need to be living in the EEA, Gibraltar, Switzerland or a country which has a reciprocal agreement with the UK. While this pledge doesn’t really change anything for expats, it’s important to be aware of your state pension benefit entitlement.
Lifetime Allowance (LTA)
Labour previously made clear their intention to reinstate the lifetime allowance, but has now dropped this pledge. Reintroducing the LTA now might complicate things further for pension scheme members. We have only recently seen an important shake up in the rules by the ousted conservative government. The new rules could have a huge impact on your UK pensions as an expat. They certainly affect the options for transferring your pension.
Pension Transfers
Previously, expats could remove themselves from the scope of the LTA tax charge by transferring to a QROPS before exceeding the LTA. Now there is a new ‘overseas transfer allowance’ which means when transferring to a QROPS, any excess over the allowance of £1,073,100 will be taxed at 25%. It could therefore be more favourable to keep your pension in the UK. You could transfer to an International SIPP, which would not be subject to this tax. When considering your options it is always best to speak to a qualified financial adviser. This is a complex area with many elements to consider and Labour may make further changes.
Pensions Review
Labour have committed to a review of the whole pension landscape.
This includes a possible opt-in option for DC (defined contribution) funds to invest in venture capital and small cap growth equity. These are typically seen as high risk investments. However, with a small amount of exposure and a long time horizon, it could be suitable for long term investors. It appears Labour think that it can be used to boost long-term returns for pensioners. In addition, this could also help the UK economy by increasing investment in new and small businesses.
But what does this review mean for your UK pensions as an expat? With such a broad review, there could be many changes that come into effect over the next few years under the Labour government, and we can’t predict them all. The best way to keep up to date with it all is to speak to a qualified financial adviser to help you navigate this tricky area.
What does Labour election win mean for your UK pensions ? Why Harrison Brook
Our team of UK qualified financial advisers are here to help and guide you through the recent changes and potential future changes by Labour that may affect you. Get in touch today if you want to find out more about how this affects your UK pensions as an expat.
