Expat Pension Transfers
Many expats leave their British pension behind, not entirely aware of the implications of their changed tax residency – new tax liabilities, new risks, but also new retirement planning and tax optimisation opportunities.
Expats should consider transferring their British pension to an overseas scheme which better suits their new circumstances – typically a Qualifying Recognised Overseas Pension Scheme (QROPS), which is an overseas scheme that meets certain HMRC requirements and thereby avoids unauthorised payment charges and other penalties which would otherwise apply when transferring funds out of a British pension.
Why Transfer a Pension Overseas
- Tax optimisation – Depending on your country of residence, domicile and particular setup of your pension, you can save significant amounts of tax and enjoy a higher standard of living in retirement. Note that your pension scheme does not always need to be based in your country of residence. Being an expat opens up a range of tax optimisation, retirement planning and estate planning opportunities, depending on your circumstances.
- Increased tax-free lump sum – With a British pension you can take up to 25% as a lump sum tax-free. With a QROPS this can be increased to 30%, unless the particular country has stricter rules in place ( lump sum greater than the UK's standard 25% can only be taken once you have been resident overseas for five full tax years).
- Avoiding the Lifetime Allowance (LTA) – With extra charges of 25% (income) or 55% (lump sum) on top of income tax, a British pension is very tax inefficient beyond the LTA (currently £1m). With an overseas scheme, your British pension will be tested against the LTA when transferring out, but after that point the LTA no longer applies.
- Protection against exchange rate fluctuations – If you retire outside the UK, the purchasing power of your British pension will depend on the pound's exchange rate. With an overseas pension scheme, you can align its currency to your future spending needs or, in some cases, you can even choose multiple currencies for diversification.
- Greater flexibility and new investment opportunities – Compared to the UK, many overseas pension schemes are much more flexible in terms of assets you can invest in, opening up a wide range of new opportunities.
The Problems with Expat Pensions
Of course, being an expat brings not only opportunities and gains. It can also make your financial and tax affairs much more complex.
- You must comply with the constantly changing laws and regulations in multiple countries, plus various international treaties, such as double taxation agreements.
- Due to the complexity, it is easy to overlook little details which could result in losses, extra charges or unwanted tax liabilities, now or in the future.
- Qualified advice can be costly and hard to find. Ideally, your adviser should understand the regulations and the financial industry in the UK as well as in your new country of residence and any other countries involved.
This is where we enter the process.
- UK Regulated Independent Financial Advisers – We are highly regulated and our advice is required to comply with some of the highest standards in the world. We provide the same standard of advice to expatriates that we provide to our UK resident clients. Our advisers are highly trained and qualified in pensions, investments, taxation and general financial planning. Our clients can rest assured that they will receive appropriate advise on their pensions and the approach taken to investing their pension fund will be evidence based and follow sound portfolios management proceedures.
- UK Pensions expertise – We recognise that expatriates, particularly those who have emigrated permanently, may have local financial advisers to deal with their local financial arrangements, these will not be able to advise on UK pensions. We have 30 years of experience advising clients on pension transfers both within the UK and internationally.
- Knowing the right people – Over the years we have gained a good knowledge of the local markets and developed a network of trusted providers and other professionals in different countries, such as investment companies, pension providers, accountants, tax specialists or lawyers.
- Independence – With the above said, we are not part of any banking group, insurance company or pension provider. Rather than selling financial products, we work for our clients, providing unbiased and impartial advice.
- Individual approach - Each of our clients is different. Understanding your unique situation, needs, goals and aspirations is a key part of our advisory process. A highly personalised service is what differentiates us from large financial institutions.
- Single Point of Contact- We can handle all UK pensions and investments for our expatriate clients and can provide a service to them wherever they reside.
- Total Clarity - We operate on a fee charging basis agree our charges with clients in cash terms before they are committed in any way. We do not operate on the basis of hidden commissions.
- Free Initial Review - We carefully check prospective clients pensions before we take them on to ensure that we are able to add any value. We will not advise a client to restructure their pension unless we are satisfied there is a valid reason for doing so. We also do not consider it appropriate to charge a client to tell them not to do something. Once we have completed the initial review, if it positive, clients can be assured that their pensions will be rearranged to meet their requirements as swiftly and efficiently as possible.
The Process: What to Expect
- The first step is to contact us using the contact form or phone number below.
- With your permission we obtain information from your current pension providers.
- Once we have the necessary details, we carry out a thorough preliminary review. This initial review is provided free of charge and its objective is to determine what options you have and whether a transfer would be beneficial or not.
- If the initial review suggests a transfer may be worth considering, we will meet with you for a more detailed discussion of your personal and financial situation, your risk attitude, goals and any other personal factors. At this stage we will also agree our fees with you which are based on the size of the transfers and are always fully disclosed to you in cash terms before you are committed in any way.
- We will analyse all the information provided and prepare full written recommendations, formulating the exact steps which should be done with your pension.
- Once you have approved the recommendations, we will execute the transfer and communicate with the pension providers on your behalf. We will keep you informed of the progress.
- After the transfer is completed, we will continue to work with you and provide ongoing reviews. These are very important to ensure your pension remains in line with your changing personal and financial situation.