We noticed a letter in The Sunday Times newspaper about an expatriate who felt that his personal pension had scuppered his retirement plans. Why are we highlighting this and why should you be interested?
The crux of the problem, as the article points out, there are complications for expats as options that are available to UK residents and not necessarily available to EU residents.
Personal Pension Options in the UK
Personal pensions have been available since 1988, and older style Section 226 and retirement annuity contracts have been available before that date. There has been mass consolidation of the pension and insurance sector with many household names disappearing altogether.
In this case, Standard Life’s insurance and pensions business has been taken over by Phoenix Life and many of these older contracts lack flexibility. Very often flexible drawdown (link to TMP blog) is not available.
The choices at retirement are-
- Transfer to another provider.
- Buy an annuity with the same provider or another annuity provider.
- Encash the fund and pay the tax on the amount over 25%- the pension commencement lump sum.
Personal Pension, Non-UK residents
The article suggests that an expat personal pension holder needs to find both an adviser that can advise in the EU as well as a pension company that will accept a transfer for a non-UK resident. There are some UK SIPP providers that will accept the transfer- as well as EU based QROPS providers.
However, before moving to a trust based QROPS it may be an idea to take tax advice as many countries do not recognise trusts and there could be unwelcome tax consequences. Here, at pensions for expats we have been saying this for years!
People should not assume the pension commencement lump sum is tax free. While that may be the case for UK residents, countries like France tax the lump sum (and there are many others)- something the journalist did not mention in the reply.
Regulated Advice Personal Pension
The journalist then states that the best option is to find an independent adviser who has qualifications for advising on countries in the EEA. Well, a UK IFA that also has European qualifications is as rare a hens’ teeth!
We would recommend you look for advisers that have UK pension qualifications (or firms that have advisers to check the advice ) as well as those with European qualifications
At Pensions for expats, we have all these bases covered. Indeed, we have advisers that hold:
- UK regulation
- UK Pension qualifications
- EU securities qualifications
- Regulated directly in at least 3 jurisdictions with passporting to others.
Don’t just accept the options offered to you if you have a UK personal pension or retirement annuity contract. Also, whilst the journalist did a good job, even he got some facts wrong, and failed to point out the tax issue of significance! Speak to firms like Tailormade Pensions who will be able to provide you with advice appropriate to you, your tax residency and your retirement objectives.
Article Date 3rd September 2020
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
- US Expats with UK Pension Schemes
- QROPS and a Pension Returning to the UK- Part One- the Expat Returns
- 10 Reasons to use a QROPS- the facts and the myths (1)
- Drawdown vs UFPLS
- Best Country To Retire?
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