The introduction of new overseas pension rules for British expats has meant the estimated one million Britons currently living abroad have been able to enjoy more of their hard-earned retirement funds. Why? Well, they transferred their UK-based pensions to foreign jurisdictions. As long as HMRC approves a particular scheme, you can protect your pension from unnecessary taxation from the UK government. Not only is this legal, the British government is actively persuading expats to take advantage of this provision. However, not everyone is eligible for this type of overseas pension transfer, so it is worth checking the facts before taking the time to make your application.
Are You Eligible?
In order to make an application, your pension must be based in the UK. You will also need to be living abroad - or planning to do so at some point within the next 12 months. Unfortunately, it is not possible to transfer state pensions to offshore jurisdictions, so they will still be liable for taxes in the UK. However, if your pension is a personal arrangement or one initiated by your employer, you should be eligible.
Rules for Foreign Nationals
If you are a foreign national working in the UK, your British-based pension should also be eligible for an offshore transfer - provided you have left or you're planning to leave the UK. A financial advisor should be consulted beforehand, however, as the best jurisdiction for an offshore pension scheme will depend on the destination country.
Meeting the Criteria for a Pension Transfer
You must be between the ages of 18 and 75 to apply for a QROPS transfer, and you will need be living outside the UK for 5 fiscal years before your obligations to HMRC are lifted. However, you can still apply for an offshore transfer of your pension funds - on the understanding that your annual income will be reported to HMRC on an annual basis during those first 5 years.
Unfortunately, you will not be able to apply for this type of offshore pension scheme if you have already taken an annuity out on your UK pension. This course of action effectively surrenders the capital in return for a guaranteed monthly income. Most pension experts agree that pension funds should total at least £30,000 for this type of arrangement to be cost-effective. However, if you have less than that in your account, you can top your funds up before going ahead with the transfer. It is also important to bear in mind that you will need to provide evidence that you are planning to leave the UK if you have not already left. This can take the form of a lease on a property or a formal offer of employment.
If you are planning your retirement abroad, you should be aware that leaving the safety net of the British welfare system poses significant risk to your happiness and well-being - if you have not made the necessary financial arrangements. A QROPS pension fund will remove many of your UK tax liabilities, provide more investment flexibility and mean you can manage your money in the local currency - all benefits that should leave more money in your pocket at the end of each month.
Which Offshore is an online consumer resource for those seeking information and advice pertaining to matters related to expatriate life and overseas pension. Click here for more information.