Why transfer the pension
WHY TRANSFER YOUR UK PENSION?
Before you transfer your UK pension, you need to ask yourself the below questions:
- Where will you retire? What are the rules for pension transfers between the UK and the country I am currently in? Depending on where you are, the transfer rules are different, such as Australia.
- How much will you need in income?
- What tax will you pay on pensions?
- Are you clear on the options available to you regarding your UK Pension Assets?
- Would you like to be in a position to make an informed decision?
LEAVING YOUR UK PENSION IN THE UK
Now that you have left the UK, you should consider the options available to you regarding your pension assets left behind in the UK.
You have three options:
- Do nothing. Leave the pension funds in the UK
- Transfer to an HMRC recognised overseas pension fund (QROPS)
- Transfer to an International or UK-based SIPP (Self Invested Personal Pension)
WHAT CAN YOU INVEST INTO WITHIN YOUR SIPP?
- Quoted UK and overseas stocks and shares
- Unlisted shares
- Collective investments (such as OEICs & unit trusts)
- Investment trusts
- Gilts
- Exchange traded funds (ETFs)
- Property & land (but not most residential property)
- Insurance bonds
THE FOLLOWING MAY APPLY TO YOU AND YOUR PENSION IF YOU LEAVE THE FUNDS IN THE UK
- Your beneficiaries may not be able to receive the total value of your fund after your death
- Subject to ongoing and fast-paced changes in UK pension legislation and tax rules
- Funds are generally held in GBP, creating a potential future currency risk
- No/Limited control of investments
- Restricted growth options, typically only inflation-linked
KEY REASONS PEOPLE TRANSFER THEIR UK PENSIONS
- 100% of your pension fund value can be passed to your beneficiaries.
- Increased tax-free lump sum availability by up to 30%.
- Early access to your pension at 55 years of age if needed, with no penalty on benefits.
- If you are transferring into a QROPS, a crystallisation event occurs at the transfer point, meaning that the lifetime allowance rules will not apply afterwards.
- The flexibility of Income. Once transferred to a private pension, you can take as much or as little as you need as an income.
- Eliminate Exchange Rate Risk. If you live abroad, receiving your pension in GBP may mean the value fluctuates month to month in relation to the currency you are spending in.
- Control of investment and growth potential.
DISADVANTAGES OF TRANSFERRING
Disadvantages of International Pension Transfer:
- Loss of Existing Benefits and Guarantees: Moving your pension abroad may result in losing valuable benefits and guarantees associated with your UK pension (DB schemes), which could impact your overall retirement security.
- Charges and Fees: You may encounter initial charges and fees when transferring your pension, and ongoing costs in your new scheme could potentially be high, reducing the overall value of your retirement savings.
- Flexibility Concerns: Ensure that your new pension scheme provides the same level of flexibility in accessing your benefits when needed. Inadequate flexibility could limit your financial options in retirement.
- Tax Penalties: Transferring your pension overseas can trigger tax penalties such as the Lifetime Allowance or overseas transfer charges, potentially diminishing your retirement funds.
- High Advisory and Setup Costs: Seek professional advice and set up accounts that may come with substantial initial expenses, reducing the immediate value of your pension transfer.
- Inappropriate Investments: Choosing investments that carry too much risk can jeopardise the safety and growth of your pension fund, potentially impacting your retirement income.
- Longevity Considerations: Underestimating how long you may need your pension fund to last requires discipline and commitment to prudent investment strategies, ensuring your financial well-being throughout your retirement years for both you and your loved ones.
WHAT’S RIGHT FOR YOU?
Whether the solution for you is, a QROPS or an International SIPP will be determined by your circumstances and country of residence. Knowing what your options are and what the potential benefits could be for you is absolutely crucial.
You will need to understand your tax position now that you live abroad.
- Are you worried about how much your retirement funds will be passed to your beneficiaries?
- Do you simply need to understand the current position regarding your pension assets?
These will all be some possible questions we can provide and help you understand the answers. When looking for the answers to these complex questions, we always recommend speaking with a UK qualified financial adviser.
HOW CAN WE HELP YOU?
If you would like to speak to one of our advisers, please get in touch today.
