Expats are receiving huge pension buy out offers from former employers who want to ditch expensive guaranteed retirement schemes that are dragging them into debt.
Britain’s largest companies are struggling to plug a £900 billion pension black hole and are offering lucrative golden handshakes to expats who want to take the money.
Dealing with a pension buy out
If you are a British expat in Thailand with an offer on the table, here’s what to do:
- Get in touch with a regulated and qualified IFA who can give you expert pension advice about final salary pensions in the UK and a Qualifying Recognised Overseas Pension Scheme (QROPS) in Thailand.
Just because Thailand has no QROPS providers does not mean you cannot benefit from the tax and investment advantages of an offshore pension
- Give the adviser a copy of the offer and details of the pension cash lump sum that the company wants to transfer out
Also list the pension benefits, such as guaranteed annuity rates and widow’s pensions
- Discuss your personal and financial retirement goals, such as where you plan to live, how much cash you think you will need for a comfortable retirement and what you want to do with any unspent pension funds
From this information, your IFA can tailor a personal retirement plan that compares the benefits of leaving a final salary pension with a fund transfer to a QROPS.
Comparing the benefits
Until recently, the move was considered risky due to final salary pension guarantees, but this opinion is easing as more company pensions are in the red and moving into government protection in the UK.
Protection means a 10% cut in benefits and an annual cap on pension payments of £37,420 a year for 65-year-olds and even less if someone wants to retire earlier.
QROPS have no ceiling on payments. They can offer flexible payments along the line of UK pension freedoms, which final salary cannot match.
Changes to inheritance laws also mean spouses can receive up to 100% of an unspent fund rather than the 50% payment from a company pension.
Expats living in Thailand may feel half a world away from what’s happening to their finances in the UK, but talking to a licensed and trustworthy IFA can make those difficult retirement decisions a lot easier.