Look­ing at your retirement op­tions if you’re plan­ning to em­i­grate

Shares - - CONTENTS - Tom Selby, se­nior an­a­lyst, AJ Bell

What does the in­ter­est rate rise mean for you? / Do I need an over­seas pen­sion scheme to re­tire abroad? / Track your in­vest­ment process

De­spite an un­char­ac­ter­is­ti­cally warm sum­mer in the UK, many hard-work­ing Brits see spend­ing their later years chas­ing the sun abroad as the ul­ti­mate retirement dream.

Un­sur­pris­ingly, mov­ing to another coun­try with dif­fer­ent tax laws, a dif­fer­ent cur­rency and dif­fer­ent so­cial se­cu­rity sys­tem isn’t without its com­plex­i­ties.

Lay­ered on these com­plex­i­ties is Brexit un­cer­tainty for any­one con­sid­er­ing join­ing the es­ti­mated 1.3m UK cit­i­zens who ac­cord­ing to the United Na­tions have al­ready re­tired to the con­ti­nent.

But what hap­pens to your pen­sions when you move to another coun­try?


Pri­vate or work­place pen­sions can be paid to you wher­ever you de­cide to re­tire to. For sim­plic­ity - and po­ten­tially to ben­e­fit from lower charges - it’s worth con­sid­er­ing get­ting all your pots in one place first.

You should also speak to your pen­sion scheme or provider be­fore you move to check how they will pay your in­come. Some will only pay into a UK bank ac­count, for ex­am­ple, while others might pay into an over­seas ac­count if you ask.

There could also be ex­tra charges to pay and, cru­cially, your pen­sion in­come will be paid in pounds ster­ling – mean­ing you’ll be ex­posed to the va­garies of cur­rency fluc­tu­a­tions.

If you want to pro­tect your in­come from such volatil­ity you could move your pen­sion into a Qual­i­fy­ing Recog­nised Over­seas Pen­sion Scheme, or ‘QROPS’. If you trans­fer to an over­seas scheme that is not a QROPS you’ll be hit with a 55% unau­tho­rised pay­ment charge by HMRC.

Be­cause a QROPS is es­tab­lished in the coun­try you re­side in, you’ll get your pen­sion in lo­cal cur­rency and so avoid the un­cer­tainty of ex­change rate rises and falls. It may also be eas­ier to keep track of the tax changes in the coun­try you re­side, rather than hav­ing to con­stantly mon­i­tor the UK’s rules and reg­u­la­tions.

How­ever, it’s worth not­ing that if you are un­der age 75 and trans­fer to a QROPS your fund will be tested against the UK life­time al­lowance – cur­rently set at £1.03 mil­lion. Any pen­sion sav­ings above this level will be hit with a charge of 25%.

You should also be aware that if you try to set up a QROPS in a coun­try you are not re­sid­ing in HMRC could hit you with a 25% penalty.

You will likely need to go through a reg­u­lated ad­viser if you want to open a QROPS. If you do so, make sure you know ex­actly what you’ll be pay­ing in costs and charges – both for the ad­vice and in­vest­ing through the new scheme.

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