Moving Your Pension Overseas:
Pension planning for Expats
Navigating pension and retirement planning for UK expats
At GSB Wealth, we understand that leaving the UK to work or retire in another country is a significant step. Ensuring all your financial affairs are in good order can be challenging. Even if you have already moved permanently, keeping your pensions and investments organised is key to a successful future. Many expats aim for early retirement, which requires a solid retirement plan. This includes considering your pension needs, reviewing or transferring existing schemes, or setting up new ones suited to your expat lifestyle.
If you would like to discuss pension planning with a qualified financial adviser, get in touch today.
Why consider moving your pension overseas?
Your pension is a vital financial asset, so any transfer decision should be carefully considered. If you live overseas or plan to move, you might consider transferring your pension for several reasons:
- Currency Management: Having your pension in the country you retire to ensures you receive income in the correct currency, avoiding exchange rate fluctuations.
- Regulatory Ease: It’s easier to keep track of tax and regulatory changes if your pension is in the country where you live.
- Employer Benefits: You might prefer a new pension scheme offered by an employer in your new country.
Options for transferring a pension overseas
It’s strongly recommended to seek regulated financial advice before transferring your pension. If you want to transfer your UK pension overseas, you must comply with HMRC rules and transfer to a Qualifying Recognised Overseas Pension Scheme (QROPS). A QROPS meets HMRC rules to receive transfers from UK pension schemes, offering greater investment freedom and potential tax benefits. Your UK pension likely falls into one of two types:
- Defined Contribution Scheme: A pension pot based on contributions.
- Defined Benefit Scheme: Provides a guaranteed pension upon retirement.
If you have a defined benefit scheme or safeguarded rights worth over £30,000, you must seek financial advice before transferring to a QROPS.
Considerations for Expatriates
You don’t have to transfer your UK pension when moving abroad. You can leave it in the UK and take income from it there. Consider the following:
- Currency and Exchange Management: Use a foreign exchange account to manage currency risk and exchange commissions.
- Understanding New Plans: Know the features and options of the new pension plan and how it differs from your current one.
- Transfer Charges: Be aware of charges for transferring and ongoing costs of the new pension.
- Regulated Financial Advice: Getting advice to navigate complex issues is crucial. Ensure your adviser has professional standing, qualifications, and experience.
Tax Implications of QROPS Transfers
Transferring to a QROPS can sometimes be tax-free, but a 25% tax charge may apply in other cases. Tax-free transfers usually occur if:
- Residency: You are a resident of the QROPS country.
- EEA transfers: You transfer within the European Economic Area or to Gibraltar.
- Employer-provided QROPS: The QROPS is provided by your employer.
If your circumstances change within five years, such as moving to another country, you might face the 25% tax charge.
Overseas Transfer Allowance (OTA)
From April 6, 2024, the OTA is £1,073,100. Exceeding this amount when transferring funds to a QROPS incurs a 25% tax charge on the excess. Transfers made before April 6, 2024, may have different allowances under the old lifetime allowance rules.
Compliance with UK Rules and Taxes
Your QROPS will have a ten-year reporting requirement to HMRC. Breaching QROPS rules, like accessing funds before age 55, can result in a 55% tax charge plus penalties. UK tax charges may still apply if you take money from a QROPS within five years of transferring funds from a UK pension scheme.
Even if you have been a non-resident for more than ten years, UK tax charges can apply if you take money from a QROPS that is less than five years after transferring funds from a UK pension scheme. If you are a UK resident, taking money from your QROPS is likely subject to UK income tax. Check the tax rules in your resident country and where your QROPS is based.
Working with GSB Wealth
Dealing with expat pensions is complex, especially while living abroad. Our experienced financial planners at GSB Wealth specialise in expat pensions, ensuring your financial affairs are well-managed for a smooth transition to your life abroad. With our expertise, we can help you understand the intricacies of transferring your pension overseas, provide tailored advice to fit your unique situation and ensure you make informed decisions that secure your financial future.
At GSB Wealth, we explore all the different aspects of your goals, taking everything into account to create a financial plan that works for you throughout life’s events.
FAQs
Moving your UK pension overseas can help you manage currency risk, keep track of regulatory changes more easily, and take advantage of employer-provided pension schemes in your new country of residence.
A QROPS is a pension scheme that meets HMRC rules to receive transfers from UK pension schemes. It offers greater investment freedom and potential tax benefits for expats.
Yes!
It is strongly recommended to seek regulated financial advice before transferring your UK pension, especially if you have a defined benefit scheme or safeguarded rights worth over £30,000.
Transferring your UK pension to a QROPS can sometimes be tax-free. However, a 25% tax charge may apply in certain cases. Tax-free transfers usually occur if you are a resident of the QROPS country, transferring within the EEA, or if the QROPS is provided by your employer.
Yes, you can leave your UK pension in the UK and take income from it there. However, you should consider currency and exchange management, transfer charges, and the need for regulated financial advice.
GSB Wealth’s experienced financial planners specialise in expat pensions, tax, and retirement planning. We provide tailored advice to help you understand the intricacies of transferring your UK pension overseas and ensure your financial affairs are well-managed.
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Disclaimer
THIS PAGE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.
THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
THE INFORMATION ON THIS WEBSITE IS DIRECTED ONLY AT PERSONS OUTSIDE THE UNITED KINGDOM AND MUST NOT BE ACTED UPON BY PERSONS IN THE UNITED KINGDOM.