Expats simplify British pensions with QROPS

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Written By Saeed Maleki

Expats simplify British pensions with QROPSA recent UK-wide study has found 38% of consumers find pensions confusing and complicated, perhaps due to the increasing complexity of their plans.

The Dunstan Thomas-commissioned consumer survey, which interviewed individuals from all age brackets, was conducted by Lancaster University Management School during September.

Individuals were asked which measures or illustrations would best help them plan for the future, and with a weighted average of 8.31 (out of 10), target income needed for their retirement was found to be the most valuable feature.

They were also most interested to know the value of their lump sum stake given upon retirement, and a predicted retirement age – based on current earnings and savings.

Understating your future

For expats living outside of the UK with a British pension, a QROPS can help with most, if not all of these concerns.

Qualifying Recognised Overseas Pension Schemes are HM Revenue and Customs-recognised pension schemes which can accept a British pension.

In terms of benefits, QROPS offer increased income, the ability to mitigate British tax, and the control to pass on 100% of the fund to loved ones upon death.

Yet by giving individuals the ability to consolidate multiple pensions from across the UK (note: not state pensions or annuities), all facilitated by an expert financial advisor, an individual can receive a consolidated report on their financial standing.

This allows for a much greater understanding of the finances funding retirement.

Consolidation of multiple pensions also allows for a greater pension pot, meaning more growth with successful investments.

In addition, consolidating your pensions means you can reduce the costs associated with their upkeep, particularly if you have a number of smaller schemes.

Yet there are many other benefits.

Lump sums, investments and currencies

Firstly, many QROPS allow for 30% of the pension to be taken as a lump sum – a much larger chunk than with the UK’s 25% limit – meaning a larger bonus to begin retirement with.

In terms of investments, QROPS also place the individual in charge of their pension by allowing a much more flexible variety of assets to choice from.

QROPS can be described as an overseas SIPP – in that they offer individuals a much wider range of investments than typical pensions, ranging from stocks and shares to collective investment funds like insurance company funds.

Thirdly, by moving a pension scheme into their new, home country – or another flexible jurisdiction – an individual is able to receive pension income in the currency of their choice.

This means they do not have to worry about timing currency transfer to receive the best rate – or lose money transferring your pension pot for investments.

Lifetime allowance planning

Lastly, QROPS allow mitigation of the UK’s hefty inheritance taxes (IHT).

This tax is based on the worldwide assets of people domiciled in the UK, and can amount to as much as 55% of the fund being passed to beneficiaries.

However, this deduction does not apply to QROPS as you have taken your pension outside of the UK.

This means the funds may be able to be passed onto loved ones free from tax at source.

The next step

To find out more about simplifying your pension and taking control of your retirement, you should speak to an independent financial advisor.

Independence is key – as it means your advisor will look at all available QROPS and jurisdictions to find the best solution for your needs – rather than channel you into a pre-determined option.

To speak to such an advisor, please use our contact form.