Transferring Pensions When Moving Abroad

Moving can be a tricky situation, transferring pensions when moving abroad can be even trickier. Having a clear idea of what to do with your finances, including your pensions can help to ease a lot of stress. 

In this insight, we lay out your options around transferring pensions when moving abroad, including how international pension transfers work, QROPS, and getting started with advice.

Key Takeaways

• Transferring pensions when moving abroad can be complicated, but having a clear financial plan can reduce stress.
• Transferring pensions abroad may result in the loss of tax benefits if not moved to a QROPS scheme.
• Leaving pensions behind when moving abroad exposes you to exchange rate risks later on.
• Seeking international wealth management advice is essential for a smooth pension transfer and understanding tax implications.

Transferring Pensions When Moving Abroad

Transferring pensions when moving abroad is one part of Retirement Planning that is especially important if you move to a new country. If you don't plan correctly, you could easily lose pensions or face unexpected tax bills. One of the best tools to effectively manage your retirement is the Pension Transfer. However, there are some key points to understand about the process of moving your pensions to another country:

Portability:

Transferring a pension allows individuals to move their retirement savings from one country to another, ensuring continuity and control over their pension funds. This is especially relevant for expatriates or individuals planning to relocate permanently.

Consolidation and Simplification

Transferring pensions can simplify financial management by consolidating multiple pension plans into a single account. This streamlines administration and makes it easier to monitor and manage retirement savings effectively.

Access to Global Investment Opportunities

Transferring a pension internationally opens up a broader range of investment opportunities beyond the individual's home country. It allows individuals to diversify their pension investments, potentially enhancing returns and reducing risk by tapping into different markets and asset classes.

Tax Considerations

When transferring a pension abroad, it's essential to consider the tax implications in both the home and destination countries. Tax regulations and treaties may affect the treatment of pension funds, including any potential tax relief, withholding taxes, or tax reporting obligations. Seeking advice from a qualified international financial adviser or tax specialist is crucial to understanding and optimizing the tax aspects of the pension transfer.

Pension Scheme Compatibility

Before initiating a pension transfer, it's important to assess the compatibility between the existing pension scheme and the destination country's pension regulations. Some countries may have specific rules and restrictions on accepting pension transfers, while others may offer incentives or favorable treatment for incoming pension funds.

Professional Advice

Given the complexity and potential long-term impact of pension transfers, seeking professional advice from an international financial adviser experienced in pension transfers and cross-border financial planning is highly recommended. They can help navigate the legal, tax, and regulatory aspects involved, ensuring that the transfer is executed correctly and aligns with the individual's financial goals.

Remember that pension transfer rules and regulations can vary significantly between countries, and individual circumstances may differ. It's essential to consult with a qualified professional and conduct thorough research to make informed decisions based on personal needs and objectives when considering transferring pensions abroad.

What is a QROPS?

A QROPS (Qualifying Recognised Overseas Pension Scheme) pension transfer involves moving a UK pension to a pension scheme in another country recognized by the UK government. 

• A QROPS pension transfer is the process of relocating a UK pension to a pension scheme in a different country recognized by the UK government.
• Individuals who have moved to another country often opt for a QROPS transfer to continue receiving their pension payments in their new location.
• To qualify for the transfer and avoid tax penalties, certain criteria must be met.
• By using a QROPS, individuals can receive their pension while residing abroad.
• UK residents who move to a country within the European Economic Area (EEA) or a country with a reciprocal agreement with the UK can access the QROPS option.

List of QROPS

Approved QROPS (Qualifying Recognised Overseas Pension Schemes) can be found on the HM Revenue & Customs website in the "QROPS List" section. This list is updated regularly and provides detailed information on the various QROPS schemes available.

Why Do I Need a QROPS?

To avoid UK tax on their pension savings: QROPS allows individuals to move their UK pension savings to a jurisdiction with more favourable tax treatment, potentially saving them money on taxes.

To have more control over their pension investments

QROPS allows individuals to have more control over the investments in their pension, allowing them to choose investments that align with their personal financial goals and risk tolerance.

To access a wider range of pension options

QROPS allows individuals to access a wider range of pension options, including self-invested personal pension plans and defined benefit pension schemes.

To access their pension savings before age 55

QROPS allows individuals to access their pension savings before age 55, which is not typically possible with a UK pension scheme.

To access their pension savings while living abroad

QROPS allows individuals to continue to access their pension savings while living abroad, which may not be possible with a UK pension scheme.

What Happens if You Move Your Pension to a Non-QROPS?

If you do not use a QROPS (Qualified Recognised Overseas Pension Scheme) for your pension funds, there are several potential consequences:

• You may be subject to UK tax on your pension funds, even if you are living and working abroad.
• Your pension funds may not be as flexible as they would be in a QROPS, limiting your ability to access and use your funds as you see fit.
• Your pension funds may not be as well-protected as they would be in a QROPS, leaving them vulnerable to potential risks such as bankruptcy or fraud.
• You may miss out on the potential benefits of a QROPS, such as the ability to invest in a wider range of assets and the potential for increased growth and returns on your investments.

Can You Move Abroad but Leave Your Pension in the UK?

Another option is to keep your pension in the UK and receive it as a regular payment. This option is available to anyone, regardless of where they live. However, it’s important to keep in mind that if you choose this option, you may be subject to UK tax on your pension payments.

It’s also worth considering how your move abroad will affect your pension contributions. If you’re moving to a country within the EEA, you may be able to continue contributing to your pension while living abroad. 

However, if you’re moving to a country outside the EEA, you may not be able to continue making contributions to your pension.

Transferring State Pension When Moving Abroad

If you move abroad, your UK state pension will continue to be paid to you in the same way as if you were living in the UK. However, the amount of your state pension may be affected by any social security agreements that the UK has with the country you move to.

Who can arrange an International Pension Transfer?

An International financial adviser can assist with arranging a pension transfer to a QROPS (Qualifying Recognised Overseas Pension Scheme). They will be able to look at your full international financial needs and make appropriate recommendations on how to proceed with your move.

Advice on Transferring Pensions When Moving Abroad

International Wealth Management offers comprehensive services including wealth planning, insurance, retirement, and expat banking, catering to the complexities of international law.

International wealth management has emerged as a specialised field due to the intricate needs of clients dealing with international regulations. Expert knowledge is necessary to navigate the diverse regulations in different countries where financial services are provided. An international financial adviser can assist in understanding tax implications and ensuring the proper setup of your pension in your new location.

Relocating doesn't require sacrificing your pension. Through effective planning and expert guidance, you can continue to receive your pension and enjoy a fulfilling retirement abroad.

If you are unsure where to start transferring pensions when moving abroad, complete the Sunny Fact Find. The answers you provide help us to find the best-suited adviser for your needs. The adviser contacts you to discuss how they can help, you decide how to proceed.