Lifetime Allowance on UK Pensions is changing
Starting on 6th April 2014 the amount you can save in a pension in the UK will fall by £250,000. This reduction means that funds in excess of the lifetime allowance could be liable to a tax bill of 55% on sums over the limit.
Transferring your UK pension overseas into a QROPS can avoid this charge. Non-residents can transfer their assets from an existing UK pension scheme into an HMRC recognised scheme abroad.
What are QROPS?
QROPS stands for Qualifying Recognised Overseas Pension Scheme. It is essential that British expats understand Qualifying Recognised Overseas Pension Schemes. QROP Schemes allow expats to carry their paid up UK pensions to almost all overseas locations, including even the USA. There are huge advantages to transferring your pension offshore, and very few disadvantages.
Advantages of QROPS
Reduced Tax Liability:
Because QROPS are based in offshore jurisdictions they can benefit from zero taxation at source. While in your country of residency you may be liable for taxation on your income, you will avoid capital gains tax on asset growth, as well as potentially avoiding inheritance tax.
Increased Flexibility:
You will have the option to select an asset management strategy that best reflects your risk level and growth or income requirements. You will work with your Independent Financial Adviser to construct a bespoke asset management plan that fits your needs. Also, you will be able to select the currency of your choice.
You won’t have to purchase an annuity as most offshore pension plans are fully flexible, allowing you to retain ownership of the asset. You can opt for a percentage drawdown instead; of up to 20% more than you could get by leaving your pension in the UK.
There are also more options when it comes to passing-on your wealth, including passing assets directly or investing assets for beneficiaries later on. UK pensions have severe restrictions and will lead to lots of red tape for your heirs to cut through, as well as being liable to UK Inheritance Tax.
Greater Growth Potential:
If your pension value exceeds £100,000 you may be able to select an offshore portfolio bond to hold your investments. This is usually a cost effective method for your IFA to buy a wide variety of investments in order to help your pension pot grow, hence providing you with the best possible income. With a pension value of less than £100,000 your IFA will select an automated asset management strategy in order to meet your growth requirements, while keeping costs at an absolute minimum. As well as this investment freedom you will be able to add lump sums to your plan at any time if you want.
What should you do now?
UK expatriates looking to transfer their retirement savings overseas, without being burdened with additional taxes, need to make sure that they obtain expert financial advice. To access these specialist international pension plans it is even more important for you to choose the best strategic advice available.
The next step in your research should be to have a preliminary discussion with a specialist adviser. Please fill in the form on the right in order to have a Expat & Offshore approved adviser contact you.