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Dec 09

What Do Expats Do With Their Pensions?

Reading Time: 4 mins

If you are thinking about retiring overseas, one thing you need to consider is your pension.

Financial matters are imperative when relocating. You’ve probably already looked for properties for sale or houses for rent near me online. You may have even factored in the cost of moving your belongings, but have you considered your pension?

QROPS stands for Qualifying Recognised Overseas Pension Schemes. It is something that all expats need to have an understanding of. Thankfully, that’s where this article comes into play. By the time you have finished reading, you will know all there is to know about QROPS.

 

What is QROPS?

So, let’s begin by revealing what QROPS actually are. As you have probably gathered by the name it relates to a pension for those outside of the UK yet it is still recognised by the British authorities. As a result, this means that a UK pension transfer is possible i.e. you will be eligible to receive transfers from the UK registered pension funds. Any pension can be transferred to a QROPS as long as you have not bought an annuity or the pension has not commenced – this is in relation to a final salary scheme. 

 

What are the benefits of QROPS?

  • You won’t be affected by the fluctuating exchange rates. With a QROPS you can invest and payout in the majority of currencies. However, when it comes to a UK pension you can only pay out in sterling no matter where you live.
  • Once you have passed away any funds left in QROPS can be left to your beneficiaries, and best of all it will be done so tax-free.
  • You will escape the 25 per cent Lifetime Allowance excess tax charge if your QROPS grows in value above the UK Lifetime Allowance.
  • QROPS are catered to those who have a mobile and international lifestyle. You can easily move from one country to another without having to worry about any underlying investments being affected as a result.
  • You will also reap the rewards of reduced income tax liability. After all, UK based pension funds are taxed at the same rate as income tax. However, there are countries that do not tax pensions, which QROPS allow you to benefit from. 

Nevertheless, it would be naïve to state that QROPS are the perfect solution for all. Every single investment possesses risks. The benefit of these schemes being so flexible can actually be a disadvantage for those who end up taking out maximum lump sums and thus end up running out of funds. However, the main risk is falling victim to unscrupulous advisors.  There are those who will take monumental amounts of money when they are transferring your funds into your QROPS from your UK pension fund. This is something you need to be really mindful of. Thus, all issues can be avoided if you choose your financial adviser with care. 

 

The benefits of SIPP and all the tips you need to know! 

A lot of attention has been given to pensions in the news as of late. SIPPs are often discussed because these offer the most flexible type of pension. SIPP stands for Self Invested Personal Pension. Thus, from the name, you will already have a good idea of what this type of pension is. The flexibility derives from the fact that you have the possibility to make your own investment decisions. 

There are many reasons why people tend to opt for a SIPP in the current day and age. Here are several of the main benefits associated with this type of pension…

  • There is a far wider range of opportunities regarding investment with this type of pension scheme; from commercial property to stocks and shares. 
  • You can take out a percentage of your pension fund as a tax-free lump sum – this is usually set at 25 per cent. 
  • Great way to consolidate pensions if you have several small schemes up and running already.
  • Flexibility over how you pay. You are in control. You can make singular payments or regular payments. You can stop and start when you like too. 
  • Beneficial for expatriates who may not have sufficient income for retirement in the United Kingdom.
  • Investments within SIPPs will grow without capital gains tax or income tax.
  • If you pass away before you begin to take away funds from your pension then you will be able to pass this onto your spouse or any other beneficiaries that you have stated.

Nevertheless, as is the case with any type of investment – especially when you are in control, you need to be mindful of certain points. Utilise the following tips and you can be certain of success with your SIPP.

  • Do your research when looking for a SIPP provider. Of course, this type of pension will firmly place matters into your hands, but this doesn’t mean that your provider becomes insignificant. Seek someone who takes the time and effort to understand your circumstances and consequently what scheme is going to best match into this. 
  • You should never go into this unguided. You need the aid of a pension’s expert or someone ingrained in the financial management industry. They will ensure that you are kept on track, as it can be very easy to feel overwhelmed when taking this on yourself. 
  • You need to be certain that you are going to be guaranteed flexibility. After all, this is one of the main reasons why people go for a SIPP. Companies providing you with this selection should cover the whole scope of retirement options. 
  • Make sure you consider your investments carefully. As mentioned; you have a lot of choices at your disposal. This encompasses everything from offshore funds, to stocks and shares, to UK government bonds, to commercial property, to open-ended investment companies, and so on and so forth. The key to making a SIPP a success is to do your research and be decisive regarding what route to go down. 

The best thing to do is to seek the aid of professionals. Look for a group of experienced, qualified and industry-driven professionals who know everything there is to know about the world of finance. 

 

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