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[Case study] How one investor saved £161,114 in tax – by doing ONE thing…

By Stuart Ritchie - March 12, 2020

A few weeks ago, a global citizen contacted us.

Being a passport holder of one country while living in another…

With numerous bank accounts, policies and pensions…

He needed help simplifying his complex financial situation.

“Am I properly set up for retirement?”, was his main concern.

His second being how he can structure his tax obligations back home in the UK.

Here’s how we helped.

Mark is based in Hong Kong but travels often for work.

He has a wife and two children.

Together, they have a portfolio consisting of:

  • 7 properties
  • 3 pensions
  • 5 investment policies
  • Cash

With multiple assets and investments, he wanted to ensure his finances were properly structured.

And, being a non-resident UK citizen, wanted to ensure there’d be no nasty surprises once he retired.

After looking into his financial situation, we were able to address his two main concerns:

Both were achieved through one simple solution…

By combining Lifetime Allowance Individual Protection with a Non-Residents Enhancement Factor.

This helped him increase his standard lifetime allowance by 33.65%.

And save 55% in taxes.

All of which amounted to £161,114…

Or an additional two years of retirement.

Meaning he and his wife could retire earlier than expected.

And spend more time together.

Without stress, anxiety or uncertainty.

So how can you learn from their story?

First, a quick look at the Lifetime Allowance (LTA)…

This is the maximum amount you can hold in a pension without incurring excess charges.

The current LTA for 2019/2020 is £1,055,000 – which is set to increase in line with CPI each year.

Individuals whose combined pension benefits exceed £1,055,000, are taxed at 55% (or 25% + their marginal rate of income tax) on amounts above £1,055,000, when they come to draw down their pension.

For every £100,000 of pension benefits accrued above £1,055,000…

£55,000 is paid to HMRC in tax.

You only receive £45,000.

For UK non-residents with UK pensions, there’s the Non-Resident Enhancement Factor to be aware of.

It’s available to individuals who have worked as a ‘Relevant Overseas Individual’ at any time since 6th April 2006…

And whose employers have been making contributions to a UK pension.

Such individuals have not received income tax relief upon their pension contributions.

However, their pension will be subject to the Lifetime Allowance in retirement and subsequently some heavy taxation.

The Non-Resident Enhancement Factor allows such individuals to an increased, personal lifetime allowance based on time offshore.

The enhancement factor can be applied for while abroad…

Or up to five years after the end of the tax year in which they returned to the UK.

This enhancement is applicable to defined contribution, defined benefit and hybrid pensions.

It can also be combined with other lifetime allowance protections to create significant tax savings. 

So what’s the next step?

If you’re concerned your finances are not properly set up for your ideal future, get in touch.

This is often a highly complex area that requires personalised financial planning…

From someone who genuinely has your best interests at heart.

A 15-minute Discovery Call with one of our financial planners…

Could relieve you of any anxiety and uncertainty.

And, like Mark, might even give you the gift of more time with your loved ones.

After all, that’s what it’s all about.

Living richly.

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