Hundreds of thousands of British expats could have a much more comfortable lifestyle if they had not decided to leave their retirement savings stranded at home when they left.
More than a quarter of expats (28%) have left their pensions and investments in the UK, according to the latest expat survey by HSBC Bank.
And with the Office of National Statistics reckoning around 3 million Brits are permanently overseas, that’s a lot of investors who could switch the pensions offshore into a Qualifying Recognised Overseas Pension Scheme (QROPS).
Why would they want to? The question is really in reverse – why shouldn’t they?
QROPS offer lots of advantages to British expats and thousands more overseas workers who spent time building a pension pot in the UK who have now moved on to another country.
QROPS features
Here are just a few of the features:
- QROPS pension payments and tax-free lump sums paid direct into a local bank account in a range of major currencies, including the euro and US dollar. This cuts down exposure to currency exchange rate fluctuations and the costs of FX exchange.
- Some QROPS providers offer enhanced tax-free lump sums of up to 30% of the pension fund, compared with a maximum 25% in the UK – on a £100,000 pension pot that increases the cash lump sum from £25,000 to £30,000
- More investment options across a range of equity markets, platforms, commodities and currencies
- QROPS are protected funds – they are outside of the reach of the British courts in divorce settlements and for collecting inheritance tax
- Once outside the UK, any further contributions to a QROPS do not pick up pension contribution relief, but lifetime allowances on fund size do not apply
Switching to a QROPS
Around 10,000 expats a year are switching their pension cash offshore to take advantage of the financial benefits offered by a QROPS, and the number is steadily rising each year.
More than 3,500 QROPS are available from providers in 42 different financial centres worldwide.
Most expats could benefit from a QROPS – those they should keep their funds in the UK are those with small pots where the cost of switching could well outweigh the benefits gained and retirement savers with defined benefit schemes who might lose some benefits if they transferred offshore.
Switching is not complicated – just request a transfer value analysis from the onshore scheme – or schemes for expats consolidating two or more funds – and speak to a suitably qualified and experienced independent financial advisor.
Expats should find the advisor will tailor a QROPS to suit their personal retirement objectives.
