Expat pensioners are suffering from the knock-on effects of tighter financial regulation following the credit crunch as British banks close overseas accounts.
One often overlooked solution is considering transferring a UK onshore pension to a Qualifying Recognised Overseas Pension Scheme (QROPS).
Many UK financial planners and pension providers discount these schemes because they lack knowledge about the offshore pensions even though the Financial Conduct Authority has told them to include QROPS as a pension planning option.
Most QROPS will pay benefits gross in a wide range of currencies into an expat bank account.
Switching a UK pension to a QROPS is easy for expats with the help of an experienced pension adviser.
Flexible access
QROPS jurisdictions are also starting to implement flexible access, so QROPS in Guernsey, Gibraltar and Malta can pay lump sums to retirement savers over 55 from April 6, 2015.
This resolves the expat problems of most UK pension providers only paying benefits into a sterling account at an onshore bank or building society held in the pension member’s name and if they have an address in Britain.
At the same time, banks and building societies are closing expat accounts and declining new applications from expats with no British address.
The British Banker’s Association and the Building Societies Association blame tough new ‘know your customer’ and money laundering laws force them to turn down business from overseas.
QROPS also counter a tax trap that means many expats cannot have a UK address or they are considered tax resident in Britain by HM Revenue & Customs (HMRC)
Cheque payments
“Part of the problem is the risk and cost of maintaining accounts for expats because we cannot carry out credit and identity checks like we can in Britain,” said a BBA spokesman.
Many onshore banks and building societies have stopped offering services to overseas customers during the past two years, including The Co-Op, Clydesdale Bank and the Britannia Building Society.
Some British pension providers refuse point-blank to pay into an overseas account, like financial giant Aegon.
An Aegon spokesman explained that the company felt paying pension benefits to offshore accounts did not offer customers the same protection as paying to a UK bank account, but if the customer had no suitable bank to accept payments, a cheque would be sent instead.
A few may accept paying to an overseas account if they are satisfied the customer passes money laundering checks.
