Options for Ex-pats - UK Pension Benefits
If you have left the UK permanently and have pension benefits in a UK Scheme that you have not accessed there are three main courses of action.
• Leave the benefits where they are
• Switch to a QROPS
• Switch to a UK SIPP
Leave your pension where it is
If you have pension benefits in a UK scheme you may be unsure of the best way to take these benefits. It may be the case that the best thing to do would be to leave these benefits where they are but there may be advantages to transfer them to an alternative scheme.
If your benefits are in a UK Scheme with very low or negligible costs such as a Stakeholder Scheme or another Occupational Scheme then transferring them is likely to mean higher annual fees and a transfer fee might be applicable especially if you have sought the assistance of a professional to do this.
Additionally, if you have accrued benefits in a defined benefit Scheme (or similar) even though the temptation exists to access your benefits earlier than the Scheme would normally permit by transferring, you may be giving up a guaranteed income. However, the various inter-related factors that might affect your decision to transfer are complex and regulated UK pension transfer advice should be sought for all Defined Benefit pension transfers to make sure the decision to transfer is right for you. EFPG can assist you in finding such an adviser if required. If you would like to know more please contact EFPG.
A Qualifying Recognised Overseas Pension Scheme, or QROPS is an overseas pension scheme that meets certain requirements set by Her Majesty's Revenue and Customs (HMRC).
A QROPS can accept transfers in from UK pension Schemes. Currently, if you live in the same jurisdiction as your QROPS or live in an EEA jurisdiction and your QROPS is also based in an EEA jurisdiction, such transfers are free from a 25% overseas transfer charge.
Generally speaking, for any pensions worth less than a combined £50,000 a QROPS is unlikely to be the best solution. As QROPS transfers and subsequent HMRC reporting can be administration heavy , the costs of a QROPS can be higher than a personal pension. The main costs are usually fixed charges so for larger pensions, those fixed costs can be relatively insignificant.
There are a number of benefits of a QROPS especially for individuals with larger pensions and/or who live in jurisdictions with a favourable tax regimes for pension income. If you would like to know more please contact EFPG.
UK Self Invested Pension Plans
EFPG has found on occasion that it is beneficial to switch UK pension benefits to a UK Self Invested Personal Pension (SIPP).
The pension reforms that were introduced in April 2015 have given holders of SIPPs much more flexibility with regards to how they can take their pension benefits and invest their pension funds.
25% of the pension pot can be withdrawn as a tax-free lump sum and lump sums and income from the other 75% are subject to the UK marginal rate of income tax (PAYE). If you have no net UK income aside from your pension, you can take £11,850 income tax free in the 2018-19 tax year. This will rise to £12,500 from 6th April 2019. However, if you should be aware that there may be taxes to pay on this income depending upon the jurisdiction where you are tax resident.
EFPG have two tailored SIPP solutions which feature low cost pension administration, a very wide range of retail investment options, a capital guarantee investment option with smoothed returns, and the expertise to minimise or even eliminate the impact of UK tax on pension income.
If you would like to know more please contact EFPG.