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UK Pension Transfers
June 30, 2021

3 Questions to Ask Before Transferring Your Pension

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Being an international worker has a multitude of benefits.  Not only do you get to move around to new and exciting locations, learn how to flourish outside your comfort zone and develop new languages, you can actually save more money. According to the HSBC Expat Explorer survey; globally 52% of expats indicate that they can save more money than they did in their home country and 57% have more disposable income. So, although moving abroad may seem like a big leap, the benefits of your move can be endless.

Moving countries can be a big task and even if your to do list runneth over, it’s important to get the question of pensions ticked off your list. With pension rules constantly changing not just in the UK, but in many other countries too, it is crucial to seek specialist financial advice which could take some of the stress out of your move.

Firstly, let’s take a look at why are people deciding to transfer?

Inflated Transfer Values

Although in recent months we are seeing what appears to be the end of a period of record high transfer values, many firms are actively trying to de-risk their liabilities by incentivising members to transfer their pensions. As a result, Cash Equivalent Transfer Values (CETV) for final salary schemes have hit new highs. Different schemes offer different levels of transfer values to members — typically 15 times to 30 times the defined benefit pension being given up by the member.

UK Pension Reforms

In 2015, the UK Pension Reforms came into effect, meaning that anyone with a final salary scheme had the option to transfer out of their scheme to benefit from greater investment freedom upon reaching 55.

Concerns Over Final Salary Schemes

For firms with large final salary pension scheme commitments, operating in the present climate is challenging to say the least. If they were to fail, your retirement income could be at risk of falling into the Pension Protection Fund.

The PPF was set up by the Government to protect the benefits of its members, meaning if your employer goes out of business leaving the scheme without enough money to pay the benefits due, the PPF may pay you compensation. If your pension scheme qualifies, compensation of 90% of benefits for members below Normal Retirement Age (NRA) is paid by the PPF.

Now, let’s take a look at three key questions to ask before transferring your pension:

1. Does my existing pension scheme allow me to transfer some or all of my pension pot?

This one is imperative. Contact your current pension provider to find out if you can transfer only part of, or your entire pension pot. Having a financial adviser on hand to go through this with you could take away any added stress and free up a little more of your time, meaning you can use it wisely to prepare for your move.

At Skybound your adviser is supported by the international pensions division UK and trained with international knowledge, so they can do all the running for you, gather all the info you need to make an informed decision as to whether it’s the right move for you.

2. Will the scheme that you wish to transfer into accept the transfer?

Before making any specific plans, it would be wise to do a bit of research into the scheme you wish to transfer your pot into. Again, this is where your adviser comes in meaning you don’t have to spend time doing all the leg work.  

3. Will living overseas effect my UK state pension?

Living or working abroad doesn’t necessarily mean that you are not entitled to still receive your UK State Pension. However, it could affect the amount you receive.

There has been changes to the minimum contributions you need to make.  You will usually need at least 10 qualifying years on your National Insurance record to get any State Pension and you’ll need 35 qualifying years to get the full new State Pension. If you have between 10 and 35 qualifying years you’ll get a proportion of the new State Pension.

So, with all this in mind, what are your options?

Leave Your Pension In The UK

If you are looking for a low risk, guaranteed lifetime income and your existing pension will provide this, then you may be better staying with your existing scheme.  It may also be the case that a UK Pension Transfer would see a substantial reduction in the value of your benefits.

Take Control Of Your UK Pension

If you have concerns over the solvency of your existing UK pension fund, want greater control over your investments and would benefit from the extra capital an increased CETV could bring, a UK pension transfer away from your existing scheme could be the right choice for you.

Did you know that if you are living overseas and are considering transferring out of a UK pension it is a requirement of the FCA that you obtain advice from a qualified professional? Here at Skybound, our team of experienced UK pension transfer advisers work in tandem with your Financial Adviser and are always on hand to help you answer the burning questions surrounding UK pension transfers.

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