It’s the dream of many Britons to retire abroad, especially to a sunnier climate, but there are issues surrounding their pension pot.
You’ll be glad to know you can take the pot of money you have built up with you, but you’ll need to comply with some rules laid down by HM Revenue and Customs (HMRC) first.
That’s because the pension pot has benefited from tax relief so the taxman wants to ensure that when you move, you do not gain too much of an advantage over leaving the money in Britain.
The process for moving your pension is called QROPS – or Qualifying Recognised Overseas Pension Scheme.
Here’s a quick and handy guide to making the most of QROPS:
Can I move my pension pot anywhere?
No, you must switch your money to an approved QROPS – but there’s plenty of choice with around 2,500 plans offered in about 48 countries.
Can I take all of my money out under QROPS?
This isn’t allowed under the QROPS regime because HMRC wants to see an income provided from your tax relieved savings in retirement. HMRC has clamped down on countries where people are allowed to take their pot in cash without paying tax.
How much money can I take out when I retire?
Essentially, you will only be allowed to take out what you would do if you remained in the UK – that is 25% of the pot upon retirement. However, some QROPS schemes allow the investor to take up to 30%. HMRC rules say that 70% of the pension pot is ring-fenced to provide an income in retirement.
What if I don’t stay for long in the country I move to?
Many Brits living permanently abroad and international workers with UK pension rights keep. their pension in one country, like Gibraltar or Malta, while moving about between other countries or living in a third
What if the QROPS fails to comply with the rules?
A scheme which pays out before the investor is 55 or breaks other payment rules could lead to a fine for taking unauthorised payments. This is quite a hefty penalty of at least 55% of the pot’s transferred value being imposed by HMRC.
Take professional advice
Professional advice is best sought for QROPS since the rules do change and schemes are removed from the list – and you may have to pay tax on pension income in the country where you live, regardless of where your QROPS is based.
If you would like to be put in touch with a qualified financial adviser, please contact us via the contact form here for a referral.
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