Many expats are asking how the new UK easy access pensions overhaul will affect their finances.
To help expats and former international workers with UK pension rights make the best financial decisions over their retirement savings here are some answers to their most frequently asked questions.
Will expats with UK pensions get early access to their cash?
It depends on what type of pension they have – if it’s a defined contribution pension, like a SiPP, private pension and most modern workplace pensions, the answers probably yes.
From April 6, 2015, anyone with these pensions can access and spend their pension funds as they wish. The new rules do not have any restriction on place of residence.
Expats with direct benefit pensions – mainly those paying a pension based on final salary – are excluded from the early access rules. Most of these pensions are public service schemes with police, firefighters, armed forces and National Health Service staff as members.
Do the rules apply to Qualifying Recognised Overseas Pension Schemes (QROPS)?
Not at the moment. A treasury spokesman says the government is aware that many QROPS are defined contribution schemes similar to SiPPs and that discussions are underway to decide whether to include them in the new rules.
A decision is promised well before April.
What happens if I switch to a QROPS before April 2015?
You may find that your QROPS will not come under the early access rules
Where will expats pay tax on early access cash?
Income tax is generally based on residence, so expats should expect to pay tax on their pension cash in the country where they live – providing the payment is gross.
If the final rules make the payment net, basic rate tax will be deducted in the UK.
Should I keep contributing to my UK pension?
Not if you are an expat with tax residence in another country – you lose the benefit of pension contribution relief topping up the money you save. If you are temporarily working abroad but retain UK tax residence, your contributions will still receive the tax relief top up.
What about the rules for international workers who have left the UK?
International workers are individuals who have lived and worked in the UK at some time and built up a UK pension fund. The rules governing their funds are the same as those for British expats.
