Any expat or international worker with cash in a UK pension needs to consider their financial plans when leaving Britain for abroad.
One of the first decisions to make is whether you are really an expat or still tax resident in Britain.
If you are on temporary leave from the UK, it’s likely you will still retain any tax breaks and allowances – including pension contribution relief to boost your fund.
Once you have permanently left the UK, you will lose any rights to tax breaks, so tax efficient investments like pensions and ISAs no longer remain your first choice homes for savings.
If you joined a UK pension before becoming non-resident, expats are still likely to pass the ‘relevant individual test’ that offers a 20% basic rate tax break on pension contributions of up to £3,600 a year for the five tax years in a row after leaving the UK.
Don’t forget the tax breaks
Don’t forget tax breaks are personal and depend on each individual’s financial and residence status, so may not apply in all cases.
The three main steps to bear in mind are:
- Establish whether you are a UK tax resident or non-resident
- If you are non-resident and intend to withdraw cash from a UK pension, find out where and how much you are likely to be taxed before taking the money. Checking before you grab the cash means you can still take advice about moving the money to minimise tax
- If you are a five-year non-resident, you are about to lose your UK pension tax breaks, so need to look at the alternatives
How QROPS solve the puzzle
One of the leading pension alternatives for expats is a Qualifying Recognised Overseas Pension Scheme (QROPS).
A QROPS is broadly run along the same rules as a UK pension, but the provider is based overseas.
Around a thousand QROPS are available from providers in more than 40 different financial centres.
Discuss your retirement options with a suitably qualified and experienced IFA who can draw up a short list of suitable QROPS for your personal circumstances. Although the market may embrace a thousand pensions, surprisingly few will end up on your shortlist because QWROPS are not a one-size fits all financial product.
However, they are designed specifically for British expats and international workers with UK pension rights who now live permanently overseas.