Taking Advice On Your UK Pension Options

23.09.11

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

Once you reach retirement age you need to carefully consider all your options for receiving pension income, and how they affect the transfer of any balance to your heirs on your death

Once you reach retirement age you need to carefully consider all your options for receiving pension income, and how they affect the transfer of any balance to your heirs on your death. You also need to take the local tax implications into account, and if you are a British expatriate you have the further option of QROPS to consider.

UK state/occupational pensions, government service pensions and private pensions are all bound by UK rules, and remain so even if you are no longer resident in the UK.

QROPS, on the other hand, are Qualifying Recognised Overseas Pension Schemes which allow non-UK residents to move their pension funds out of the UK and achieve more flexibility to set up their fund to suit their expatriate lifestyle and requirements.

As an expatriate, when you retire the three main options for your pension funds are:

1) You can buy an annuity

2) You can start income drawdown

3) You can move into a QROPS

UK pensions and pension transfers are heavily regulated in the UK by the UK Financial Services Authority (FSA). Only advisory firms which are authorised and regulated by the UK Financial Services Authority are able to give advice on pension transfers. So even if you yourself are no longer UK resident, your adviser still needs to be FSA authorised and regulated to have the authority to give advice on all three pension options listed above.

While QROPS themselves are not UK pension schemes, the transfer from a UK scheme to a QROPS still comes under the FSA?s jurisdiction.

When it comes to pension transfers, you need advice on transferring out of your existing scheme and advice on how QROPS will benefit you.

Again, only advisers who are authorised and regulated by the FSA can help you with both of these, as well as with the actual transfer paperwork. If your adviser is not authorised and regulated by the FSA, he can only talk to you about what QROPS are and what they can do for you, he cannot advise on your current UK pensions and whether better options are available by leaving your funds in the UK.

More and more British expatriates are moving their private pensions into QROPS, and with good reason. QROPS can offer considerable benefits to expatriates, such as:

  • Your fund and the income received can be in Euros, thus reducing currency exchange costs and risk.
  • No UK tax on any benefits received and no UK PAYE applicable.
  • No tax is payable on income or gains within the fund (other than withholding taxes on certain investments).
  • Depending on your country of residence, the taxation of withdrawals from a QROPS is usually more beneficial than if you keep your current pension.
  • The benefit of the fund can pass to your heirs, and it is protected from inheritance tax.
  • If you have been non-UK resident for five complete and consecutive UK tax years when you die, QROPS escape the 55% death charges which apply to UK pension funds if you were in drawdown or aged over 75 when you die.
  • There is no requirement to buy an annuity, though you can buy one at any stage if you wish.
  • You can have a flexible investment plan across a wide range of funds, designed around your personal objectives, circumstances and attitude to risk.
  • With a QROPS you are not necessarily restricted to the Government Actuary?s Department (GAD) rules for income drawdown.

Contact us to find out more about QROPS and whether they would be suitable for you. Blevins Franks is authorised and regulated by the UK Financial Services Authority for the conduct of pension and investment business.

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual must take personalised advice.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

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