Cash Offered To Expats Quitting UK Company Pensions

Lisa Smith, BA (Hons), CeFA
By

Company pension schemes are dangling cash carrots in front of Australian expats they want to persuade to give up their final salary pension rights.

Huge sums of money are reportedly on offer as Britain’s largest companies try to buy out of expensive pension liabilities.

Australian expats who want to take up the offer can switch their retirement savings out of the UK into an Australia Qualifying Recognised Overseas Pension Scheme (QROPS).

A pension transfer will cover the whole fund – including buy out cash, contributions already in the pot and any tax relieved top up.

Moving the cash out of Britain also unlocks some tax and investment advantages for expats.

QROPS benefits

These include:

  • A 30% tax-free lump sum, rather than the 25% offered by a UK pension
  • Release from the lifetime allowance cap that limits a UK pension to £1 million. The UK pension fund will be tested against the lifetime allowance on transfer, but providing the value is less than £1 million, no penalties will be incurred and the pension can grow to any size once in the QROPS
  • A wider range of investment opportunities
  • Pension payments to a local bank in Australian dollars to avoid foreign exchange fluctuation and to reduce transfer charges
  • Pension payments with no income tax deducted
  • Inheritance tax advantages for relatives receiving unspent pension funds
  • Payments from the age of 55

Pension freedom

Australian expats who want to withdraw retirement savings to spend as they wish can also consider a Malta QROPS.

A Malta QROPS is available to expats in Australia and is the only international finance centre offering pension freedoms that allow retirement savers to draw all or some of their pension to spend.

Australians who have returned Down Under after working in the UK and building up pension rights can transfer their frozen pension funds into a QROPS as well.

The best way to find out about how Australians and expats can benefit from switching to a QROPS offshore pension is to speak to a regulated and qualified IFA.

An IFA can discuss the pros and cons of switching a final salary pension to a QROPS and tailor a retirement plan that best suits personal financial goals.

Further QROPS Information and Guidance

For more information about QROPS and the benefits it provides, download the iExpats QROPS Guide or complete the Get Advice form.

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