UK Pension Transfers
We are dedicated to helping you maximise your pension income and benefits by identifying the right pension solution for you – wherever you are in the world, and wherever you choose to retire.
Our detailed understanding of UK and international pensions and our international licences, mean that our dual qualified advisors can provide you with clarity and simplicity - helping you to cut through the complexity and potential pitfalls of optimising your pension funds and benefits, wherever you are in the world, and wherever you choose to retire.
Transferring your UK Pension
In April 2006, the UK government announced that anyone with a personal or occupational UK pension fund who leaves or intends to leave the UK [becoming non-resident for tax purposes] would be able to transfer their retirement savings1 to an alternative pension scheme.
Transferring your UK pension to an international scheme can have a significant impact on the tax you pay, when you can access your pension benefits, the lump sum value you’re able to withdraw, and how your family can benefit from your pension funds - so it’s important to take expert advice, to ensure that you understand your options.
1. Please note that the UK State Pension cannot be transferred.
Your 3 Options
If your pension funds are left in the UK, they could be:
- subject to income tax at source of up to 45% when income is withdrawn from the pension.
- subject to ongoing tax and pension legislation changes.
- held in £GBP, creating a potential future currency risk.
- held in an underfunded Defined Benefit Scheme*.
- held in a scheme giving you no control of the underlying investments.
- restricted in terms of their growth options and capital protection.
- held in a scheme which doesn’t allow your family to benefit fully from your pension funds after your death.
* As at July 2023 nearly one in ten of all UK final salary schemes are underfunded, with an aggregate deficit of £2.3bn – Source: UK Pension Protection Fund [PPF].
You can hold an HMRC Recognised Overseas Pension Scheme (ROPS) if you have a UK personal and/or occupational pension scheme [with a value of more than £100,000 invested, as a guideline] and you have left the UK (or are planning to leave the UK in the next 12 months) and are living in the EEA (and will continue to do so for the next 5 years) or are resident in a country with its own ROPS.
Transferring your UK Pension to a ROPS offers multiple potential benefits, including tax efficiency and greater flexibility:
- Avoid UK tax on your pension income – You will pay tax in your country of residence, rather than in the UK (which could be up to 45%).
- Maximise the value passed to your beneficiaries – 100% of your funds will be passed to your beneficiaries, regardless of your age when you die.
- Hold and invest your pension fund in any currency – Instead of being restricted to £GBP in the UK, a ROPS allows you to hold and invest your funds in any currency – for example, the local currency in your country of residence, or the currency of the country where you plan to retire.
- Transferring to a ROPS is a 'benefit crystallisation event' - The value of the transferred funds would previously have been tested and taxable in excess of the UK pension Lifetime Allowance (LTA) of £1,073,100. However, the LTA charge was recently suspended [in the chancellor's 2023 Spring Budget] meaning that transfers made in excess of the LTA are not currently being taxed. This remains the case as long as the LTA charge remains suspended, and this current legislation stands.
Recognised Overseas Pension Schemes can offer numerous valuable benefits to British expats, however when determining whether a ROPS could be the right option for you its important to be aware that if you are transferring from a Defined Benefit scheme you would effectively be giving up a guaranteed income for life and there could be a charge for transferring your pension overseas.
It’s important therefore that you seek advice from a qualified financial advisor to ensure that a ROPS is the right option for you, depending upon your individual circumstances.
A Self Invested Personal Pension (SIPP) is a UK government recognised personal pension scheme that allows you to take control of your own investment decisions as you save for your retirement.
If you no longer live in the UK, an International SIPP allows you to transfer and consolidate benefits from UK-registered pension schemes easily and efficiently to your new country of residence, while still protecting you under UK regulations.
The key benefits of an International SIPP are:
- Consolidation - Consolidate all your fragmented pensions into one pension for cost and time effective investment management and administration.
- Maximise the benefits for your loved ones - 100% of your funds will be passed to your beneficiaries if you die before age 75 and a marginal rate of UK income tax will apply to your beneficiaries if death occurs after age 75. If you have a Defined Benefit or Final Salary pension, your spouse would only receive a reduced benefit and your children could receive no benefit, depending on their age.
- Investment flexibility - You have the ability to be involved in how your pension funds are invested.
- Hold your pension funds in any currency - Instead of being restricted to £GBP in the UK, an International SIPP allows you to hold and invest your funds in any currency - for example, the local currency in your country of residence, or the currency of the country where you plan to retire.
- An International solution - An International SIPP is a UK-regulated product and will continue to work for you, whether you live and retire abroad, or return to the UK.
International SIPPs benefit from robust UK pension regulation but this can be complex and subject to change. As an expat it’s also essential to understand whether contributions to and withdrawals from an International SIPP would have any potential tax implications in your country of residence.
And there are further considerations when determining whether transferring your UK pension to an International SIPP is the right option for you. By transferring to a SIPP you would be taking on the management of the investment risk, and if transferring from a Defined Benefit scheme would effectively be giving up a guaranteed income for life.
So, whilst International SIPPs can offer numerous valuable benefits to British expats, if you’re considering transferring your UK pension arrangements to an International SIPP it’s important that you seek advice from a qualified financial advisor to ensure that it’s the right option for you, depending upon your individual circumstances.
Meet Our International Advisors
As international pension experts, our dual qualified financial advisors can help you to understand your options and whether transferring your UK Pension to an International Self Invested Personal Pension (SIPP) or a Recognised Overseas Pension Scheme (ROPS) is the right choice for you.
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