Those expats residing in South Africa that opt to leave their UK pension where it is leave their funds subject to UK pension legislation. And despite the most recent Budget announcements declaring that the fundamentally restrictive nature of the UK pension market is over for now, there is still much work to be done separately to secure the savings of hundreds of thousands of UK pension holders.
Defined benefit schemes in the UK are currently running at a frightening deficit of £116 billion across the top FTSE350 companies. It is a deficit that has the Government of the UK in panic mode. Is it irretrievable? Nobody can say for sure, but the trends suggest that those that have the option, aren’t hanging around to find out.
Further changes to UK pension legislation are inevitable, and the uncertainty of what’s to come is proving to be a problem for those living overseas who have the chance to get their savings out.
Since 2006, expatriates with a UK-based pension have been able to benefit from a Qualifying Recognised Overseas Pension Scheme (QROPS) transfer. These schemes must be approved by HM Revenue & Customs (HMRC), but they exist in various jurisdictions globally, and they offer stability, growth potential and tax benefits as well as a variety of other perks.
Growing Market in SA
There are currently 30 QROPS based in South Africa itself, which is beneficial to begin with as ongoing contributions can be made with no currency fluctuation exposure. Each scheme and each jurisdiction has its own set of rules, procedures and fees. Sometimes it may be a good idea to transfer into the jurisdiction that you intend to be in when you retire, although how many of us really know 100% where that is likely to be. So another consideration should be the level of fees attached to any potential transfer from one scheme to another. There are providers out there who have schemes in multiple jurisdictions and do not charge for any required transfer.
Anybody that has a UK pension can benefit from QROPS, even if the funds saved are relatively small, there is a solution which can be found that should be of benefit. Obviously any QROPS advice should be taken from an experienced professional, and fortunately in South Africa there are many.
Over 200,000 UK expats live in South Africa, and the number of transfers in light of the current UK uncertainty is increasing annually. This year has seen the most South African pension transfers since QROPS began, which coincides with some of the biggest changes to UK pension legislation for 100 years.
But there are more significant legislation changes on the way over the next few years, so it promises to be a busy time for QROPS providers operating in the South African market.
