Pensions, British Expats and QROPS

Guest Post by Mike Foster

After the recent article for US taxpayers, I thought it was only fair to include some financial information for UK expats.

Expats dream of enjoying their time abroad, whether it’s a short work assignment or a long-term move to retire.

I often refer back to my first move, Tokyo Japan. First I sorted out my flights to get there, accommodation and even started to go on Expat forums to meet people.

But there was one thing I struggled with — finances and banking.

No one was there to help or offer any real expertise. Your normal bank can talk to you all day about what great benefits you have with a credit card whilst you’re abroad or what to do with your pension and investments whilst in the UK. But that doesn’t really help those moving abroad!

You’ll be glad to know there are people out there who can help, but don’t get drawn in. Just as if you were in the UK, you need to find someone you can trust who has the expertise you need.

I wanted to give people an idea of what they can do with pensions and investments when offshore or moving offshore.

When discussing your pension you can take the pot of money you have built up in the UK or around Europe with you, but you’ll need to comply with some rules laid down by HM Revenue and Customs (HMRC) or the country equivalent first.

That’s because the pension pot has benefited from tax relief so the taxman wants to ensure that when you move, you do not gain too much of an advantage over leaving the money in Britain.

The process for moving your pension is called QROPS – or Qualifying Recognised Overseas Pension Scheme.

Here’s a quick and handy guide to making the most of QROPS:

Can I move my pension pot anywhere?
No, you must switch your money to an approved QROPS – but there’s plenty of choice.

Can I take all of my money out under QROPS?
This isn’t usually allowed under the QROPS regime. Essentially, you will only be allowed to take out what you would do if you remained in the country of origin. However, some QROPS schemes allow the investor to take up to 30%. A scheme will also break the rules if taken before 55 and there could be as high as 55% tax.

What if I don’t stay for long in the country I move to?
Many Brits living permanently abroad and international workers with UK pension rights keep. their pension in one country, like Gibraltar or Malta, while moving about between other countries or living in a third.

Offshore Investments
Can I move my existing investment onshore offshore?
You can sometimes, it can really depend on what your current holdings are and what your plans are going forward. Some providers will allow you to transfer in existing stocks and shares as well allowing you to stream line your portfolio.

What tax do I pay?
Tax will vary from Country to Country, The best thing is to be transparent and this is where true advice is key. Example: your UK advisor may have done really well for you whilst in the UK but you have now moved to Spain and you have not declared the bond investment. New Spanish rules could tax you as much as 120% of the investment.

Don’t let your finances be the last thing you think about — financial planning should happen well in advance of the move. Tax and investment are scary things so don’t shy away from it, get help.

The benefits of Professional advice is best seen for QROPS and investments since the rules do change and schemes are removed from the list –- and you may have to pay tax on income in the country where you live, regardless of where your investments and QROPS are based. Any individual questions please contact mike@finsburyint.com.

Mike Foster has been working in the financial sector for the last 10 years both in the UK and offshore arena. Mike describes himself as client centered, which includes an ongoing relationship whereever the residency for best possible results.

photo by Images_of_money on flickr