Last Updated on 31st October 2024
Most prospective expatriates recognise the huge importance of protecting and managing their retirement income, whether they intend to draw on their pension funds immediately following an overseas relocation or know that in the years to come, their retirement assets will be key to maintaining the living standards they expect.
Relocating to an overseas country involves countless considerations regarding pension transfers, tax exposure, wealth protection, flexibility about how you invest and draw on your pension, and how the different product structures and options apply to your personal circumstances.
Lets explore the benefits and value of specialist guidance and why consulting a knowledgeable, qualified pension transfer specialist is strongly advisable to ensure your retirement plans are properly managed well in advance.
Understanding Current and Changing Legislation and Tax Liabilities
Any changes you make to your pension scheme must comply with UK rules and regulations around pension transfers while also adhering to potentially very different requirements in your chosen new country of residence.
Pension tax is a broad-scope area, but a financial adviser with expertise in pension transfers can review your current pension funds, looking at all your retirement assets and evaluating which taxes you may be liable for – and how reforms to regulations might influence your plans. For example:
- The recently scrapped Lifetime Allowance has given many expats a false sense of security, with the assumption that a pension income drawdown or a transfer of any value will be tax-free. Unfortunately, this is incorrect, and new allowances limit the lump sum withdrawals and value of pension transfers you can make before you hit a tax exposure threshold.
- FCA rules state that anybody considering a pension transfer worth over £30,000 must seek professional advice. This is a mandatory requirement that ensures consumers can demonstrate they have received advice from a regulated adviser.
- Those transferring into a Recognised Overseas Pension Scheme (ROPS) may still be exposed to the Overseas Transfer Charge if their fund is over a certain value or if they are transferring their fund to a region outside of the EU.
Alongside checking the legality and restrictions around a pension transfer, expats will also need guidance about how their residency status, the type of pension funds they hold, and their anticipated retirement age might impact their pension transfer options, and the potential tax charges.
Structuring Your Pension Favourably for an International Move
The next aspect of your pension transfer planning that requires personalised guidance is how you structure your pension. There are multiple possible routes you might take, which could have a considerable impact on your future finances.
Optimising your retirement funds, investment strategies, and tax exposure is always worthwhile. Although a ROPS transfer is often regarded as the obvious choice, it may not necessarily be the most advantageous for every family.
During a consultation with our wealth management teams, we will review several aspects before making any recommendations, which could include:
- Analysing guaranteed pension benefits, most often provided through defined benefit schemes. While a defined benefit transfer isn’t impossible, this should be reviewed with great care to ensure you aren’t sacrificing a guaranteed minimum level of income for life.
- Your longer-term inheritance and succession plans, where transferring a scheme out of the current structure could affect your protected pension benefits, the way you can pass a final salary scheme to a spouse or nominated beneficiary, and the inheritance tax exposure your heirs may need to budget for.
- The transfer value and associated tax, and whether an alternative type of transfer or reinvestment could protect your retirement wealth from a significant tax bill while ensuring you have the flexibility to, for example, take early retirement, access a larger tax-free lump sum, and retain full control over your pension fund.
Making the wrong decisions could mean your pension transfer is delayed or refused, you encounter unexpected tax liabilities or administrative charges, or you even lose some of the key pension benefits you have saved for many years. Therefore, this process is essential to making informed decisions.
Exploring Alternative Pension Transfer Solutions
We’ve touched on the potential to select a different type of pension transfer from a ROPS, noting that the right options will always depend on your investment risk appetite, the time between your relocation and intended retirement age and your objectives.
The most advisable plan of action could differ between defined benefit transfers, where a transfer into a personal pension scheme could impact your protected income, transferring private and occupational defined contribution schemes, and transferring workplace schemes with more rigid rules about how and when you can access your retirement assets.
A ROPS transfer has several potential tax benefits and enables expats to tailor their pensions, provided an approved scheme at the point of the transfer meets their requirements.
However, other solutions could include a transfer to a Self-Invested Personal Pension (SIPP), which avoids exposure to transfer taxes, coupled with tax advantages, convenience and greater freedom in how their retirement funds are invested and drawn.
Every option has pros and cons, different investment choices, tax implications, and structures. The viability of one solution will also depend on the nature and value of the pensions currently held when using a pension transfer to combine multiple pensions in one place.
The Benefit of Bespoke, Independent Pension Transfer Advice
Transferring a pension with relevant, reliable, and trusted advice from an established pension transfer specialist is a great way to ensure you make sound decisions that will not adversely affect your retirement assets and ensure your pension planning contributes to long-term financial security.
Consulting an independent pension adviser ensures that the recommendations are tailored to you and your circumstances and that you have oversight of all the considerations and options rather than opting for a transfer into a scheme that might carry unnecessarily high tax exposure.
Our advice is to speak with a pension specialist with a comprehensive understanding of the pension landscape, regulations and tax regimes both in the UK and your new home overseas, who will take the time to review your plans and priorities and ensure you are completely happy that your selected pension transfer route is suited to you.
Further information and contact details for our specialist pension transfer advisers are available through our UK Pension Transfer pages or by getting in touch with your nearest Chase Buchanan location to arrange a convenient time to talk.
*Information correct as at October 2024