If you are saving into a UK pension but expect to leave the country to become a permanent expat soon, the last chance to boost your pension in this tax year is about to pass.
Many expats switch their UK pensions to more flexible and tax-effective QROPS pensions and if this is part of your financial plan, the countdown to the end of the tax year is a crucial time.
While prospective expats are UK tax resident, they still qualify for pension contribution relief that can bolster retirement savings by up to 45%, depending on the rate they pay tax.
Every resident taxpayer gets at least a 20% top up from the government when they pay into a pension.
For every £80 contributed, the top up is £20, making a £100 contribution.
End of year pension planning
For higher (40%) and additional (45%) rate taxpayers, this top up becomes £40 or £45, meaning wealthier earners have to contribute less to earn a £100 pension contribution.
April 5 is the closing date for pension contributions in the 2015-16 tax year.
Any tax boosted contributions can transfer to a QROPS without penalty.
High earners also lose out on how much they can contribute into a pension from April 6.
The lifetime allowance (LTA) drops to £1 million from that date. The LTA is the maximum size of a pension fund that a taxpayer can accrue during their lifetime. Any fund exceeding £1 million attracts tax penalties.
As long as a pension is less than the LTA on the date of transfer, once switched to a QROPS, there is no limit on a fund size.
Use it or lose it allowances
Anyone earning more than £150,000 a year has their annual allowance tapered from £40,000 to £10,000 inclusive of pension contribution relief from April 6 as well.
The annual allowance is how much someone can contribute into a pension in a single tax year.
Any taxpayers who have not used their pension allowances for 2012-13 will lose any right to carry forward the allowance on April 5. That means retirement savers with spare cash can pump the money into a pension and boost their cash by at least 20%.
Non-earners can also boost their savings by paying up to £3,600 into a pension by April 5 to gain pension contribution relief – and they can take advantage of the carry forward rules as well.
For more information about QROPS and the benefits it provides, download the iExpats QROPS Guide or complete the Get Advice form.
