Posts Tagged ‘Overseas Pension Transfer’

UK Expat Pension Members Decide to Retire Overseas

Monday, January 11th, 2010

According to a recent study, conducted by a prominent financial institution in the Isle of Man, UK expats that have taken up positions in employment overseas – throughout their working life – are deciding to stay abroad in their retirement rather than return to the UK.

The main reason cited for remaining abroad, throughout retirement, is the cost of retiring in the UK is perceived to be too high. Indeed, the figures in the study suggested that £400,000 was the minimum level of wealth needed in the UK for a successful retirement.

Given this situation, what are the options for UK expat pension members that have accrued benefits in UK pension schemes, as well as benefits in their foreign employment schemes?

One of the main disadvantages of UK pensions, for UK expat pension members, is that the income from a scheme (either in the form of an annuity or drawdown) is assessable for tax in the UK – should the member return to the UK in retirement.

Tax on retirement income is not applicable from every type of scheme for every jurisdiction or country in the world, however, which can give a UK expat pension member the choice of overseas pension scheme to transfer their UK funds to – providing it is a QROPS (Qualifying Recognised Overseas Pension Scheme).

If an individual has retired to country that is a tax haven, such as the United Arab Emirates, or to a country that does not tax pension income from their own pension schemes (such as Australia and New Zealand), a transfer to an appropriate QROPS could lead to a tax free retirement abroad – which can appeal more to an individual than retirement in the UK.

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QROPS and Guaranteed Annuity Rates

Saturday, November 28th, 2009

There are many UK expat pension members, that have migrated abroad, who are existing members of UK pension schemes that date back years. Many UK pension schemes, from the 1980’s and before – such as Retirement Annuity Contracts (also known as section 226 contracts) – offered guaranteed annuity rates (GARs). For those UK expat pension members with GARs, that are contemplating a transfer to a QROPS (Qualifying Recognized Overseas Pension Scheme), should take advice as to whether they will lose the guarantees and the overall impact on their retirement income.

What are Guaranteed Annuity Rates?

A GAR is the minimum annuity that a pension member is offered as pension income when they retire. The annuity rate that is offered by the scheme provider is usually more generous than the standard annuity rates available today. Typically, the older plans would offer annuity rates of 10% or more – which is unheard of today.

Expat pension members that are fortunate enough to have GAR benefits in their pension, would have to think very carefully as to whether the QROPS income that they could potentially receive would be greater than the benefits that they are giving up from their existing scheme.

Factored into the equation would be the tax position that the individual would be in when receiving income. Would a QROPS, without guaranteed annuity rates, provide greater income solely because a QROPS could be more tax efficient? Would the investments, within a QROPS, have the potential to grow to a greater fund-size pre-retirement?

Global QROPS Ltd would be able to research the best options for those expats with GARs in their pensions.

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What are QROPS Exactly?

Friday, September 18th, 2009

Many people migrating and indeed, many advisers of clients migrating, could well be coming across the acronym QROPS for the first time. For those who are looking at a UK pension to overseas pension transfer, would probably be told that their pension should go to a QROPS.

With all the acronyms, abbreviations and letters that appear in Her Majesty’s Revenue and Customs (HMRC) legislation, it is unlikely that someone would have come across QROPS, unless they were researching an overseas pension transfer or knew someone that was researching an overseas pension transfer.

That said, what are QROPS? The initials stand for Qualifying Recognised Overseas Pensions Scheme, and, in short it is the only type of scheme (overseas) that you can transfer your UK pension to.

For migrating individuals that have built up a UK pension pot, which would have grown with the assistance of HMRC tax relief over the years, HMRC would want those funds to provide an income in retirement. As other jurisdictions in the world do not have the same rules for their pensions, HMRC made the decision that UK pension could only transfer to an overseas scheme that agreed to pay out benefits broadly on a par with UK schemes (within 5 years of the pension member’s overseas residency).

For an overseas pension scheme to become a QROPS, the administrators would have to register and be approved by the UK’s HMRC – and their responsibilities once their approval is granted are clearly defined in HMRC rules. For more answers to the question what are QROPS? Speak to overseas pension transfer specialists Global QROPS Ltd.

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