Our pensions are one of the most crucial financial investments we make and are there to provide a safe, comfortable and secure retirement enjoying all the things we love!
However, the world of pension transfers can seem complicated, with multiple different types of scheme with varying pros and cons.
Many Chase Buchanan clients come to us for help managing a combination of pensions, to find the best way to combine or utilise them – these can include:
- Private pension plans
- Personal Self Invested Pension
- Overseas pension provisions
- Restructuring pensions for expats
- Auto-enrolment pensions
- Employer pension schemes
- Government pensions
Let’s walk through how pension transfers work, what your options are, and how using a financial adviser can maximise your income streams throughout your retirement.
Pension Transfers Explained
Your pension works like any investment; you make payments into the scheme, which is invested depending on the type of plan, and the level of selected risk exposure.
Pension transfers are a way of directing your pension fund to a different product, investment plan or provider. This is an excellent way of managing your retirement budget, having control over how and where it is invested, or consolidating multiple plans into one, easy to access, scheme.
Reasons to Transfer your Pension
There are many different scenarios in which it may be beneficial to transfer your pension – both from a financial, and a security point of view! These include:
- Consolidating multiple pension plans for better growth.
- Opting for a pensions provider who offers the investment potential you would like.
- Reducing your fees.
- Choosing pension investment plans with higher income.
- Revising your risk exposure.
- Relocating your pension scheme to another country if you live, or are moving abroad.
- Making the pension tax efficient in your country of residence
- Making your pension easier to access and manage.
The key to successfully managing your pension is to work with an experienced financial adviser.
With so many options available, the crucial factors are:
- What you want to achieve from your pension funds.
- Structuring your pension around your plans.
Pension Transfer Options
One of the top reasons to use a wealth management consultant to transfer your pension is that you plan to move abroad or are already an expat living overseas from your country of origin.
If you are considering transferring your pension, a pensions adviser will talk to you about your plans, and what sort of pension structure would best suit you.
This includes consideration of lots of factors:
- Where you plan to live when you retire.
- What plans you currently have, and whether there are any restrictions on moving those plans (such as exit fees).
- Your tax status, and how changes to your pension scheme will impact you.
- What sort of risk exposure your investment funds have, and what level of risk you feel comfortable with.
- Plans for the future, and whether you have any purchases, costs or investment plans that will require the release of a lump sum of cash.
- When you wish to retire.
It is essential to work through these questions to draw up a comprehensive understanding of your financial position and aspirations.
Once your adviser knows what you wish to achieve, they can get to work planning and strategising to put your pension funds to work!
Benefits of Pension Transfers for Expats
If you live overseas from your country of origin or plan to retire abroad, then your pension planning is an important consideration. One strategy to think about is a ROPS – a Recognised Overseas Pension Scheme – we’ll explain this in a little more detail below.
The primary benefit to choosing such a scheme is that expats have the option of choosing to release a lump sum, without any tax liability.
There are also further tax efficiencies available, which can make your retirement more comfortable and maximise the returns from your retirement savings. For example, by having pension payments taxed through your local jurisdiction, you can save a significant amount of tax – even as much as 35% and above!
This all depends on the tax regulations in your country of origin, and where you plan to live during your retirement years, so consulting with an expert financial adviser is essential to get this structure right.
SIPPS vs ROPS
These schemes are some of the most popular choices for expat pension transfers – and have lots of benefits to compare!
- SIPPS stands for Self-invested Personal Pensions
- ROPS stands for Recognised Overseas Pension Schemes
A SIPP, in a nutshell, is where your financial adviser manages your retirement fund on your behalf and collects a tax rebate against the value of your funds in exchange for putting certain restrictions on your pension.
These can be tailored to your requirements and circumstances – for example; you might decide not to access your pension until you reach a certain age. In the meantime, your fund is invested according to your risk profile and will continue growing in value until you would like to start drawing down your pension.
ROPS are a form of international occupational pension plan, which can accept transfers of funds from UK pension schemes. This sort of scheme carries significant taxation benefits; including the potential to draw lump sums and options to save on tax liabilities by choosing to pay tax at the local rates.
Which scheme is right for you will depend on your circumstances, your pension schemes, and your plans for the future – so it is essential to work with a wealth management expert who can advise on the best solution.
Expert Advice in the Changing Retirement Landscape
Pensions are personal, and one of the most crucial forms of investment most of us will make in our lifetimes.
With continually changing legislation and regulations, it is crucial to consult a financial adviser who understands the regulatory framework and can evaluate the pros and cons of each type of pension transfer for you. Particularly when it comes to international pension schemes, you need to understand the tax rules, what they will mean to your revenue streams, and whether your plans will make one option more advantageous than another. For example, if you plan to relocate to another country during your retirement, or wish to return to your country of origin at some point, this will be a deciding factor in ensuring you make the most of your retirement funds.
Chase Buchanan are established pensions and investment experts, who structure bespoke retirement plans to ensure every client receives specific advice about the best way to invest for their retirement. For access to our extensive expertise, and clear guidance about the different pension transfers – and what they could mean for your retirement – get in touch today. You can also request our free Pension Planning guide to help you navigate the waters of pension transfers and retirement planning with confidence!