In this article, I will do a brief guide on the options you need to consider when moving abroad to your U.K pension(s).
You have a range of options if you are looking to move abroad for you U.K private pension.
It does rely on what your circumstances, age, pension scheme, where you are moving, pension amount to what are the most feasible options so will need to see an IFA. If your pension is worth over 30,000 GBP you are required to see an IFA.
For example, most countries outside of Europe do not except Rops (This article may help). This may limit your options to what pension options are available to you and look more at International SIPP if wanted to transfer offshore.
Also, consider if you can roll your pension with a bilateral agreement. For example, you can roll U.K pension(s) into an Aussie Super scheme (as long as the funds are accepted). However, bilateral pension agreements are only with a few countries and can be complex and subject to stipulations.
Some pensions such as the military, as well as some government schemes, are not subject to be transferred. For more information on this, it is worth seeing your IFA.
As I have previously spoken about in a few of our articles, there are two types of pension.
Defined Benefit (DB) and Defined Contribution (DC) pensions. These can both be moved across overseas to International SIPP, QROPs, or QNUPs.
If you are holding a DB pension it is becoming harder to transfer due to the regulations and will take more time to transfer than the DC scheme.
To start with for both types of pension, you will need to fill in a letter of authority to your IFA this will just obtain your current pension value. You will need to normally do a one-pager of filling out details, schemes, and pension companies.
This will allow the IFA to get a recent value of your pension. For DB pensions you are allowed CETV once a year free of charge by law if you wanting more reports in the same fiscal year you will need to pay.
The Letter of Authority will not allow the IFA to touch your pension. This will be to review your current private U.K. pension(s).
If you do decide to go ahead for DB pensions, you will need to pay for an independent report, your IFA will help with go through the logistics of this, it will cost between 750-1500 GBP for the report. This will detail the pros and cons of you transferring your pension out.
I will not go over the full options of moving individual schemes on DB pension(s) as will need to see an IFA but will need to consider with DB as a whole.
Transfer Value
The value of the CETV (Cash Equivalent Transfer Value) as with DB they are gold plated and guarantee an income for life. But, with the current climate of low interest some pension schemes are offering high values to transfer out due to low-interest rates and longer life are making it harder for companies to keep up with income so this will need to be calculated and run through the options with your IFA.
Life Expectancy
Your expected life expectancy, this will impact for transferring or not. No one knows how long they will live but with people living longer, it can be a good reason to keep an income for life. Alternatively, with shorter life transferring out and having a lump sum.
The Pension Scheme
Some pension schemes are in deposits (see our article on Final Salary Pension Benefits: Expat Edition) I have seen many transfer out of their final salary pension for this reason so need to take into consideration the stability of the pension.
Your Age
If you have a DB scheme, you will need to think that with younger expats you have a higher chance a growth with the pension freedom act that can add to the value to the pension over a longer time frame. While also a consideration of the longer life expectancy and income would it be worth transferring.
Benefits
These can be cheaper than share buys or company perks.
Your Personal Situation
I have had a client that wanted to transfer his DB pension out. He had more than enough to live on with his currents assets so therefore wanted to make use of the high transfer value. Think about will you need the income for life or could you afford to live without the pension income?
Do remember when you transfer out it is not possible to transfer back into the scheme.
DC pension, for these it is somewhat more simple, you can just fill in an authority letter value to obtain a transfer value. This then can be transferred if opted to do so. The time frame for this depending on the cooperation of the pension provider can take around 3 months.
If You Do Transfer What Options Do I Have?
As spoken about in a number of articles you can move into SIPPs or if living abroad to an International Sipp. If you are in Europe you can move to Malta Rops.
For Rops, you have a few locations Gibraltar, Isle of Man, and Malta depending on where you are. Where you are will decide on which location you transfer to. In short, the jurisdiction do have some different elements into pension drawdown options, tax free PCLS, and annual income allowance. Please read my full article on QROPs locations and laws.
If you have to transfer out offshore you will need to wrap it in a trust, I have listed a number of offshore accounts in my previous articles in going offshore with U.K pensions.
This can add around 300 GBP a year to the cost of the platform so this will need to be factored in (see my article on trust options).
Platforms
For platforms, you have the offshore market, you have two options Bond Option Platforms or Platforms.
Bond platforms these are by companies like RL360, FPI. These do have higher fees but do offer more Investor protection with location security and normally issued by larger companies for security.
I would be careful if looking or have been advised these as they offer high commission for the IFA, so be inclined to ask why this has been chosen as the fees can be between 1.5%-2.5% with 5% upfront costs. If you add in a trust and fund costs and advisors cost this can add up 3%-4%. (see my article on offshore bonds and platforms). These can however be a viable option if you have a pension over LTA or Nill band rate that can be structured in trust and legally reduce tax. But will need to see a qualified IFA to run through this with you.
The other option is platforms such as Capital Trus and Ardan these can be lower cost and have a wider fund range. These charge 0.5%-1% a year.
From a personal point of view as these are located and regulated. These platforms seem strange to me because people are still getting advised to go in RL360, FPI, OMI with the high charges. Furthermore, you have the ability to wrap the platforms in a trust so would not buy this option.
Should I Move Offshore or Leave In The U.K?
I have done a number of videos and articles on this. Both have pros and cons.
- U.K. has cheaper platform costs and can SIPP for around 0.25% without an advisor and 1-1.5% with an advisor for higher value pension (over 250,000 GBP) they do offer the most competitive rates.
- The U.K has good regulations for advisors and funds.
- Offshore this can be more expensive but in the last few years have seen it become more competitive with the U.K platform cost can be kept to 0.5% and ongoing fees with advisors and platform and trusts (depending on the value of your pension and advisor fee) can be 1.2%-2% a year.
- These are guidelines and would be within the price that you are willing to pay.
- Offshore you have wider fund ranges, currency options, tax-efficient, stability are all some options to look offshore.
Can I Leave Some of my Pensions in the U.K While Moving Others Offshore?
Yes, with people working in more companies this is common that people accumulate different pensions. They can opt to move as many or all of their pensions.
Many leave, some pensions in the U.K if they have a final salary and move DC.
It is worth considering that under the pension freedom act one advantage of SIPPs in the U.K or offshore is the consolidation of control of your pension.
What Are The Advantages of SIPP?
Many DC schemes that I have come across unlike other international pension plans such as, 401Ks, Aussie Super, don’t have high returns most often get eroded by inflation with the pension freedom (more so if you are younger) you can have control and look to get higher returns if you are younger and this can add up over a longer period of time.
You have the option of adding a beneficiary, this can be done with a SIPP and can be really good if you are in ill health or have a younger spouse or children
Disadvantages of SIPPs?
- Your pension investment can go down as well as up. Statistics show that many DIY investors fail over the long term.
- As stated above you will lose some perks you get with the company, such as losing their contribution.
Does Anything Change if I Transfer to a SIPPs?
Yes, a number of aspects change.
- Funds, you can change the funds within your SIPP and have the option of consolidation.
- Other options are beneficiary options.
What Happens if You Die With a SIPPs?
You have some rules in changing into a SIPP. Depending on the platform and where you transfer, if you die before 75 you can transfer all of the benefits to a beneficiary tax-free.
If you die after 75 your SIPPs will be transferred and be taxed at marginal rates.
What is worth noting that if you die and your SIPP has not been touched and uncrystilised it does not form part of your IHT estate although if you have taken the PCLS at 55 it is counted as part of your estate on the lump sum.
Can I Still Contribute to my SIPPs?
You can add to your SIPPs in another platform, for those that are overseas it is worth looking at QNUPs that you can add to while you are still working and work as a tax-efficient vehicle. (See my article on QNUPs).
What Funds do You Have With a SIPPs?
This depends on that platform but most of the main funds that are regulated are available.
What Happens to my SIPPs in a Divorce?
This depends on the situation, you have a range of options, please read my article for more information on that.
What Schemes Can I Transfer into if I Move Abroad?
Some of the popular ones are Aussie super, Canadian RSP and U.S 401k under extreme circumstances. One you can’t roll into is the Kiwi savers scheme. For more specific countries or advise please feel free to get in touch.
Will I Have to Pay Tax Twice on my Pension if I SIPPs or International SIPP?
This depends on where you are located, with SIPPs if your income is over the U.K income rate you will be subject to tax you also might be taxed on the income in the country where you withdraw depending on double tax laws with the U.K. please get in touch for more specific information.
Can I Withdraw Early From my SIPPs?
No not with an International or SIPPs. The same rules apply, you can access your pension at 55 with a tax free 25% lump sum of your pension.
What I would say is, with the pension freedom act I personally believe it’s a great option as having personally advised friends and relatives to use this to make use of their pensions for reason such as low growth or restrictions on investment options. With much younger expats you have the option to grow over a long time that can make a significant difference if compounded over 20+ years at 2-3% higher growth than you are currently getting. Also, with more people changing companies frequently with data showing the average person changes jobs every 5 years it is likely that you might have a few pensions and therefore consolidation can make this easier. However, with this, a lot of people have lost money through ill advice or bad investment choices so would be careful of this.
For more information please feel free to get in touch via the contact form below.
