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Since April 2006, British expats can move their pensions abroad with HMRC’s approval. The receiving scheme has to be a qualifying recognised overseas pension scheme (QROPS).
This means it has to be regulated as a pension scheme in the country in which it is established, and recognised for tax purposes in that country.
Theoretically a QROPS can comply with these requirements and be tax efficient. If the QROPS is in a country that taxes pensions at a minimal or even a zero rate, a pension transfer can potentially have tax benefits.
A transfer can benefit some people, but:
Because of the risks involved, you must always take the advice of a Financial Conduct Authority (FCA) regulated pension transfer specialist. Our retirement experts hold that accreditation.
Additionally, our retirement experts are Chartered Financial Planners, certified by the Chartered Insurance Institute (CII).
They are bound by the CII’s Code of Ethics, which requires them to:
“I knew of AES before I contacted them. Their reputation precedes them - when my accountant and I discussed the issue of me reaching my LTA I contacted AES and they've delivered an excellent long-term retirement plan for me. Tax efficient, flexible and bomb proof.”
“I spent a long time reading up on QROPS and transfers - AES's site is about the only one I found that gives honest advice about the pros AND the many, many cons.”
“Having transferred my pension I found out I'd done totally the wrong thing. I'd lost guaranteed benefits and was in despair. I heard of AES through a talk Andrew Hallam did and I contacted them. They've helped me make the best of a bad choice and get back on track.”
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Whether to transfer a pension has to be determined on an individual basis. The following potential benefits do not apply in every case:
QROPS is an acronym for qualifying recognised overseas pension scheme. This is a pension structure that allows individuals to move the trustee ownership of their pension benefits outside the UK.
This can achieve additional tax efficiency in some cases - but not in all cases by any means, given the recent tax treatment changes related to UK defined contribution arrangements for example.
Tread carefully if you’re considering making a transfer, and seek qualified regulated advice.
Usually, the biggest tax benefit achieved via a QROPS transfer is related to lifetime allowance (LTA) planning.
Yes, it may be possible, depending on the type of pension scheme you have.
However, there are lots of things to consider, mainly the benefits your current scheme offers versus the potential advantages of transferring.
This can be a complex decision to make, and one you must take advice on. The advice you take must be from an individual who is a qualified pension transfer specialist, and in turn, they must work for an organisation that’s regulated to offer pension transfer advice.
The advantages of a pension transfer are often heavily over-sold by unqualified advisers who may stand to profit substantially from a transfer via commissions and hidden fees.
Tread with caution; the value of your pension must be preserved so your future retirement plans are not scuppered.
Lifetime allowance is the amount of pension money an individual can accrue before potentially incurring additional tax.
This allowance is currently £1m, although there are various transitional protections available to boost this.
Additionally, if any pension benefits were accrued whilst the pension member was a relevant overseas individual, there is an overseas enhancement factor available which can further increase the cap.
Lifetime allowance taxation arises when certain benefit crystallisation events (BCE’s) occur, and this is an area of pensions that requires complex financial advice.
This will depend on whether you have defined benefit or defined contribution pension.
If you have a defined contribution pension, whether this is a UK scheme or a QROPS will also impact the tax consequences for your beneficiaries.
Defined benefit schemes will follow the scheme rules which can differ markedly from scheme to scheme.
Defined contribution schemes are more flexible in this regard, and will either pass to beneficiaries without any taxation being due, or any tax liable being based on the income tax rates applicable to the beneficiary, dependant on how old the pension member is when they pass away.