How To Transfer UK Pensions
Pension Transfers for UK Expats
An increasing number of expats are requesting information on how to transfer UK pensions. To determine if this is the right option, deVere provides independent financial advice. This is done through a four-step complimentary review.
Should I transfer my Pension?
Determining whether you should transfer your pension or not is a big decision. To understand if it is in your best interest or not requires an in-depth analysis of your financial and personal profile.
At deVere, we conduct a complimentary four-step analysis for clients to help them better understand their options. The first step in the process involves educating you on your entitlement. This will require deVere to request a full report(s) from your pension scheme(s).
Step two is known as a fact-find; this process takes around an hour and allows a financial advisor to gather all the necessary information about a client’s financial situation and long-term aspirations.
The third step involves an advisor cross-analysing the information from the fact find with the client’s current pension arrangements. The purpose of this is to see if the current arrangements are suitable for the client. Once complete, an analysis report is created. This is presented to the client showing areas of concern and potential areas of improvement if indeed there are any.
Following the delivery of the report, if the advisor believes improvements can be made, and it is in the interests of the client to transfer their pension into a different arrangement, this will be discussed. Once these four steps are complete, the client can decide if they wish to stick with their current arrangement or opt for the suggested improvements.
UK Expat Pension Entitlement
There is no pre-set UK expat pension entitlement. An individual’s entitlement is generally split into two types.
The first is the UK state pension which is funded via national insurance contributions during employment. To receive the full state pension entitlement, 35 years of full contributions are required. People with a UK national insurance number can make voluntary overseas contributions at a heavily discounted rate to gain the full entitlement.
The second type of pension entitlement that a UK expat may have is an employer-sponsored pension. There are two main types of employer-sponsored pensions, Defined Benefit and Defined Contribution. Once again, the entitlement for these pensions is dependent on time in employment and the arrangements held during employment.
What is a Pension Transfer?
In the simplest form, a pension transfer is the movement from one pension structure to another. There are two main types of pensions that deVere deals with. These are DB (Defined Benefit, also known as Final Salary) and DC (Defined Contribution).
A Defined Benefit Pension is a guaranteed income for life pension which pays the member until death. It is usually a workplace pension which is based on your final salary and how long you have worked for your employer.
A Defined Contribution Pension is a lump sum pension structure. Money is put into a pension pot by you and your employer, which is then invested in financial products such as mutual funds, stocks, or bonds by the pension provider.
It is common for pension members to wish to explore what options are available for them.
Defined Benefit Pensions
Defined Contribution Pensions
|Assures a specific income until death.||Depends on various factors such as the amount you pay into the pension pot and how well the investments do.|
Members may be able to exchange ongoing lifetime income for one-off lump sum (CETV).
Remaining pension pot can be passed to beneficiaries upon death.
|The amount you will receive depends on factors such as your salary and years of service.||The more you pay in, the more you could get back when you stop working. However, this is dependent on the performance of the pension fund.|
Other common pension transfers include moving several defined contribution pots into a singular defined contribution pot. This is known as Pension Consolidation.
What is a Pension Transfer Value?
The total amount of money in your pension savings at a specific moment in time is known as the ‘fund value’. The amount of money you can take out and move it to another pension provider is called the ‘transfer value’. When a final salary pension scheme determines a transfer value, they may take into account your years of service and your final salary among other factors including interest rates.
Defined Benefit members who are entitled to a guaranteed income until death may wish to request a cash equivalent transfer value. This is the amount the scheme will offer a member to exchange an ongoing income for a one-off lump sum. This is a defined benefit into a defined contribution pension transfer.
Pension Transfer Rules
There are several rules which clients should understand on the topic of pension transfers. These cover which pensions can or cannot be transferred. They stipulate up until what age a member can transfer a pension and specify what level of regulated advice is required for a pension transfer to take place.
Securing Post-Work Financial Freedom for You
To achieve the long-term financial wellbeing in retirement that you and your loved ones’ desire, the best way is to start saving as early as possible.
Too many put it off altogether or don’t save enough to realise their own long-term goals of stopping work at the age they want and having enough money to last throughout their retirement.
There are plenty of financial solutions that help you to secure tax-efficient, legacy-securing financial freedom in retirement, whatever age you are.
We provide expert guidance on all aspects of understanding and optimising your pensions. We take pride in helping you plan for your financial future. Our expert advisors will explain the available options, answer any questions, and suggest the best way forward.
If you are looking to retire abroad, deVere can help you through the process of sorting out any financial predicaments you may face.
Can I maintain a UK Pension from abroad?
At deVere, we specialise in helping expatriates living overseas to develop and build their pension, offering peace of mind for when they are finally ready to transition into retirement. We consider your desired quality of life and use this along with other factors to devise a plan to help make your retirement dream a reality.
In the past few years, pension products have changed considerably, with one of the biggest changes being the reduction in charges in modern pensions.
Understanding your Pension Benefits
At deVere, we help clients find out about several factors including their pension’s death benefits. As there are massive differences in death benefits between schemes, this is important to understand. If there is a chance someone will be financially dependent on your pension after you pass away, you need to make sure you know exactly what they can expect. We can even find out which taxes you would need to pay, or even if you do not need to pay tax at all.
Furthermore, since many people are unaware of the size of their pension savings, we can research all your UK pensions, no matter how big or small, to provide you with a cumulative pension figure.
There are several choices available to expats who intend to retire abroad, including:
- Qualifying Recognised Overseas Pensions (QROPs)
- Remaining in existing company scheme
- Regular savings plans
What is a SIPP?
A SIPP (Self-Invested Personal Pension Plan) is a type of personal pension scheme which allows people to choose from a broad selection of investments approved by a pension trustee. With a SIPP, you can choose how your money is invested, which means you can have greater investment control over your pension.
UK Pension Transfer QROPS
A QROPS (Qualifying Recognised Overseas Pension Scheme) is another HMRC-recognised pension transfer scheme that is based in a jurisdiction outside the UK but keeps the same standards or equivalent as a UK pension. It allows UK nationals living abroad to gain full control of their UK pension.
What is a QNUPS?
A QNUPS (Qualifying Non-UK Pension Scheme) may be an ideal solution for both UK residents and non-UK residents who wish to fund their retirement while also wishing to pass retirement assets on to their loved ones upon death. The pension fund can be used by you during your lifetime and any remaining balance can be passed on to your chosen heirs upon death.
How soon should I start saving towards my pension?
The earlier you start thinking about kick-starting your post-work financial life, the easier it will be for you to make the required payments to ensure that you enjoy a stress-free retirement. Whether you’re early or mid-career, just about to start your retirement or retired already (for estate planning), the time to start proper planning is now. Contact deVere’s qualified pension experts for specialist, independent advice today.
Will my pension be taxed?
Depending on where you are in the world, you may have to pay tax when you draw money from your pension. Alternatively, people living in nations with no income tax such as the U.A.E which have double taxation agreements with the UK, may be able to draw their entire pension tax-free. deVere provides pension advice in over 100 countries including Spain, Germany, and the UAE.
What happens to my UK pension if I get divorced?
People living outside of the United Kingdom and being members of pensions held in the UK often ask the following questions: Can I keep my pension in a divorce? Will divorce affect my pension? How much of my pension will go if I get divorced? Here are some of the things you should be aware of concerning this topic.
Can I transfer my pension to my bank account?
Once a member reaches the age at which they can benefit from their pension, they can transfer funds into their bank account. Schemes have different rules as to what type of bank account they can transfer funds into.
How long can UK pensioners stay overseas?
There is no limit to how long a UK pensioner can stay overseas. However, there are certain considerations UK pensioners should think about, including health care access, currency conversion from their GBP UK pension into their local currency and income tax laws.
Can I maintain a UK pension from abroad?
A UK pension state and workplace pension can be accessed from overseas. In terms of ongoing servicing, an increasing number of expatriates are opting to receive localised advice in their country of residence. This will often involve advice on investment and currency management, drawdown (if you have a Defined Contribution pension, this is a way of taking money out of your pension to live on in retirement), and estate planning.