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Change approved to UK Pensions

Change approved to UK Pensions

Old Nov 8th 2014, 5:56 pm
  #61  
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Default Re: Change approved to UK Pensions - NEW Spin

Originally Posted by Patrick2976

Thanks for the update... do you now what the new rules are for PRIVATE pensions, and the status of expats on drawdowns and tax, please?
Jon
For private pensions you may be able to take advantage of the new flexible (or 'uncapped') drawdown rules announced in the March 2014 UK budget. This allows you to access all of your pension as long as there is provision left in place for a £12,000 per annum guaranteed income (usually made up of state pension plus a purchased annuity). In broad strokes (depending on your age and personal circumstances) that will equate to somewhere between £100,000 - £150,000 being used to buy an annuity at today's rates. Also you have to be aware that, after the current 25% tax free allowance, lump sums and withdrawals will be taxed at marginal rates - up to 45% (the Governments obvious agenda is extra tax revenue - a little short sighted of them you could argue). Further, most UK providers are saying they will tax at source. The other big change is the reducing of the 55% death charge on UK pensions to 45% for the over 75s (defined contribution pensions, if you die before 75, can now be passed on to beneficiaries tax free). There are plans in 2016 to reduce to marginal rates but given that most people will die after 75 and beneficiaries are likely to take the lump sum that's still a potential tax of 45% on your pension before it's passed on to your family/beneficiaries.
In Spain, drawdown from UK private pensions is taxed as income. You can benefit from much reduced rates if you have bought an annuity or have a temporary annuity certificate from a QROPS overseas pension. Be aware that Hacienda are looking into undeclared pension income from abroad and although there is an amnesty from January 2015 for 6 months they will be collecting back taxes - just no fines. For now. Hope that helps.[/QUOTE]

Thanks Patrick for the great detailed response and Fred for the additional info, (as usual!) Re the tax at source, I think there is a form you can send to the HMRC to get that back, (but you may/will be still taxed in your new country) I think its called an R43.

I have just moved my private pension to a new provider who is more flexible than my old one in the UK... (I avoided QROPS - after I got oversold it, and I got suspicious).. and I have many options now to consider.

I also heard this... confirming what you said Patrick - meaning there are perhaps other considerations to taking out a drawdown - not 'purely' financial ones:

Currently should you die before touching your pension 100% of the fund is payable to your beneficiaries tax free as a lump sum. Once you go into drawdown, after the potential initial 25% tax free withdrawal, any lump sum payment is taxed at 55% (although this is under review and may be reduced to 40% to tie in with Inheritance Tax). However your surviving spouse will be able to switch the plan into her name, so your wife could then take income payments subject to income tax at 20%. Under the new rules she could therefore take the whole fund out in one go although she would have to pay higher rate tax on anything over the basic rate band. (She could therefore draw it out in stages).

As OP for the thread I'm glad we have had overall a good + informative discussion so far.

Thanks
Jon

PS Have BE changed the format? I cant quote the previous post in a little box as before, so am using blue for my comments
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Old Nov 8th 2014, 6:49 pm
  #62  
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Default Re: Change approved to UK Pensions - NEW Spin

You're welcome Jon.
A further couple of points to keep in mind are;
1) The current 55% is a pension 'charge' on death. This can have serious consequences for surviving spouses living in Spain as Hacienda may charge Inheritance tax on lump sums being passed on (as, unlike in the UK, IHT exists between spouses in Spain). The double tax treaty in place between the UK and Spain doesn't cover IHT. For double IHT issues something called 'unilateral relief' can be used. However this doesn't cover a death charge (or future income tax liabilities) on one side and then IHT on the other so a UK pension lump sum being passed on to your spouse on death could create two separate taxable events.
2) For people with estates that would attract a UK IHT liability (UK IHT is charged to the estates of UK domiciled individuals irrespective of where they are resident) - a UK pension could be used, on your death, to prove UK domicile even if you had severed all other ties in order to be non-domiciled.
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Old Nov 8th 2014, 9:06 pm
  #63  
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Default Re: Change approved to UK Pensions

I worked for many years for Unilever in the UK. I have just had an updated forecast from them about my pension values at 63,64 and 65.
I asked about the option to take the "pot" and was told that this is not available to a final salary scheme pension pot accrued from a company scheme.
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Old Nov 8th 2014, 9:21 pm
  #64  
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Default Re: Change approved to UK Pensions

Originally Posted by Jalonboy
I worked for many years for Unilever in the UK. I have just had an updated forecast from them about my pension values at 63,64 and 65.
I asked about the option to take the "pot" and was told that this is not available to a final salary scheme pension pot accrued from a company scheme.
That is correct. You would have to transfer to another scheme first. But be careful - the benefits of a final salary scheme are often considerable albeit The Unilever scheme is around 2 billion euros in deficit I believe..

Last edited by Patrick2976; Nov 8th 2014 at 9:30 pm.
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Old Nov 8th 2014, 11:32 pm
  #65  
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Default Re: Change approved to UK Pensions

Also take into account that under new FSA rules you will have to pay for advice .
The benefits of a final salary scheme are far better than any thing you can get in the annuity market.
You can still take up to 25% of your funds in cash.
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Old Nov 9th 2014, 12:03 am
  #66  
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Default Re: Change approved to UK Pensions

I wasn't suggesting he should buy an annuity. Just that he would have to transfer to (for example) a SIPP in order to access flexible drawdown. The FSA is now the Financial Conduct Authority btw ;-)
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Old Nov 19th 2014, 8:49 pm
  #67  
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Default Re: Change approved to UK Pensions - NEW Spin

Not all public sector schemes...Not that moving from such schemes is a great idea in most cases.

"The government has now confirmed that it intends to remove the option to transfer to a DC scheme only from the unfunded public service pension schemes (except in very limited circumstances). However it will continue to allow transfers from funded public service pensions to DC schemes, and it confirms that this includes the LGPS."
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