A UK pension transfer isn’t a new choice, it is however, an option that is often not discussed between client and adviser. However, with UK pension transfer values continuing to increase, many international workers with a UK pension are now considering this option in the search for greater investment freedom.
If you hold a UK pension and are now living overseas, transferring your UK pension to a more tax efficient vehicle such as a SIPP or QROPS is one option that you must consider.
Why Consider A UK Pension Transfer?
Inflated Transfer Values
Firms are actively trying to de-risk their liabilities by incentivising members to transfer their UK pensions. This combined with the expectation that bond yields will remain low for longer has resulted in Cash Equivalent Transfer Values (CETV) for UK pension transfers hitting record highs.
Concerns Over Final Salary Schemes
For firms with large final salary pension schemes commitments, operating in the present climate is challenging to say the least. If they go under, your retirement income could be at risk of falling into the Pension Protection Fund (PPF)
UK Pension Reforms
In 2015 the UK Pension System changes announced by then Chancellor George Osborne 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.
QROPS, SIPP's or QNUPS? Your Lifetime Allowance has just reduced to £1m, have you protected your pension? Is it as tax efficient as it could be?
Remove Inheritance Tax Liability
QROPS are not subject to UK IHT unless the person inheriting the pot is resident in the UK.
Control over your income
Unlike Defined Benefit pensions, a QROPS or SIPP can give you control over your income, perhaps spending more in the early years of retirement and reducing it as you get older.
What Are My 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.
What Is A SIPP?
A Self-Invested Personal-Pension (SIPP) is a straightforward UK based pension which, with the help of your financial adviser allows you to take greater control of your pension fund. Transferring your UK pension to a SIPP can provide increased investment choice and greater flexibility over income options at retirement, you can tailor a retirement plan to suit your individual needs.
It is estimated that one million people hold a SIPP, and as platform efficiencies have allowed lower cost solutions to be reached by more investors, SIPPs are becoming more attractive and increasingly popular for those looking to transfer their existing UK pension to make the most out of their retirement provision.
A Qualifying Recognised Overseas Pension Scheme is an international pension plan, recognised by HMRC. As an international plan, it can benefit from local taxation and adapt to your changing circumstances - particularly of use for those retiring offshore where residency and taxation are a key component of long-term income planning. When you transfer your UK pension into a QROPS, it is no longer subject to the ever-changing UK pension legislation, can benefit from improved tax efficiency for those resident outside of the UK for at least ten years, and does not carry a pension lifetime allowance when tested on transfer from the UK.
A QROPS has to meet certain criteria. It must be:
Established outside of the UK
Recognised for tax purposes in the country where it's located
At Skybound we know that making a decision on whether a UK pension transfer is the right option for you can be daunting, which is why 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.