There are an estimated 4.7 million British expats living and working abroad and with increasing uncertainty over the security of UK pension pots, more and more are choosing to move their retirement funds overseas. According to recent statistics, there was a 15% rise in the amount of expats switching their pensions over to Qualifying Recognised Overseas Pension Schemes (QROPS) last year. The QROPS scheme, set up by HM Revenue and Customs in 2006, aims to improve mobility of the workforce and the tax benefits can be considerable as long as you are not resident in the UK. The details, however, can be complicated to get to grips with. Harrison Brook explains all you need to know about transferring your pension abroad.
What are the requirements?
The organisation managing your UK pension scheme will first ensure that the scheme you are using is indeed a QROPS. The overseas scheme will then need to agree to a series of HMRC stipulations. The most important of these is that no UK tax will be liable as long as you are not living in the UK when payments from your scheme begin to be made or for any of the five years previously. The QROPS has to inform HMRC if these terms are breached. Additionally, any unauthorised payments or lump sums that would have incurred tax had they been made from the original UK pension, also need to be declared and UK tax will apply. To learn more about transferring your pension abroad today, Get Started with Harrison Brook.
What else do I need to think about?
With a QROPS, it is possible to consolidate all of your pension investments into one pot, potentially with just one financial advisor, making it much easier to manage. The income you receive from your QROPS can be paid gross, depending on the tax laws of the country you are living in, whereas it would be paid out to you net in the UK. Even though you may also be liable to pay tax in your new country, this can still add up to a significant financial benefit. In addition, if you are in a gold-plated final salary scheme, you will have greater protection in a QROPS than you would have in the event of a pensions scheme collapse in the UK. Recent clamp-downs by the UK government on pension tax efficiencies have lowered confidence and many believe there will be further cuts in the coming years. All this is good news if you are thinking about transferring your pension abroad ! Take the first step and contact an adviser today.
Harrison Brook – Investing in your tomorrow…
Harrison Brook should be your first port of call for expert online financial expat advice. Our highly experienced team gives free and transparent advice to enable you to get the most out of your retirement funds. If you are living and working abroad and you have questions about how your UK-based pension could be working better for you, get in touch with us today.
The information contained herein is for informational purposes only which is subject to change and should not be relied upon. You should seek advice from a professional adviser before embarking on any financial planning activity.