Expat Pension Changes

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Two changes to UK law may have a major effect on those planning to live and work abroad – and some may have to postpone their plans to leave Britain.

Financial experts are saying the changes will hit anyone planning on claiming their full basic state pension.

From April 2017, only those pensioners who have made 35 years’ worth of National Insurance Contributions will be entitled to claim the full rate of £144 a week.

That’s an increase of five years on the current claim limit.

So anyone of pensionable age who is planning to retire abroad after that date may have to reconsider their plans.

Residency test

More importantly, for expats who live and work abroad but spend time in the UK is the new residency test that decides which is introduced from April.

There will now be less flexibility on where British people are registered as a resident for tax purposes under the Statutory Residency Test (SRT).

The SRT is essentially a three part test to determine where someone lives and pays tax. The test includes questions about the number of days spent in the UK and how many homes they own.

These changes mean that expats will have to take expert financial advice to avoid getting into trouble with the taxman – and to plan effectively when they retire.

However, expats should also be aware that this route to financial advice isn’t as clear as it once was since the Retail Distribution Review brought in some major changes on the recommendation of the Financial Services Authority (FSA).

Financial advice

Since January, a financial advisor will be registered as being independent or restricted – with the latter only being able to recommend financial products from declared providers.

An independent advisor is just that – he or she can advise on a wide range of products but whether they are restricted or independent they must recommend a product which benefits the client and not them.

In addition, they must also reveal how much their advice is costing and what they are getting from the financial services firm concerned.

The advisor must also meet a new professional standard qualification in order to offer advice.

With these changes it is vital that an expat, or someone planning to retire abroad, will have to take proper financial advice if they are to avoid coming unstuck with their plans.

To help find an independent financial advisor, those seeking advice should ask for the advisor’s Statement of Professional Standing (SPS) which shows they have been approved by the FSA and have agreed to abide by the Code of Practice for Approved Persons.

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