Retirement savers planning to become expats can take advantage of the proposed new £500 advice allowance.
The pension advice allowance is not a free lunch though.
The government wants to make taking professional financial advice more affordable for the not so well-off with smaller pension pots.
The allowance lets them to dip in to their pension funds to spend £500 without paying tax.
Although spending the allowance is not extra cash, the £500 is on top of rather than part of any tax-free lump sum paid by a defined contribution pension.
That rule excludes paying for financial advice about direct benefit or final salary workplace pensions.
How the allowance works
Retirement savers will not get their hands on the allowance, but the proposed measure involves instructing a pension provider to pay a financial adviser.
The government has to introduce a special allowance to cover the payment, otherwise under current rules, the money would become an unauthorised pension withdrawal and attract a 55% tax charge.
Public sector, civil service and workplace money purchase pensions are excluded under the allowance proposals.
The allowance will also come with an age cut-off, so only retirement savers under 55 years old can benefit.
Under current rules, anyone considering taking money to spend from retirement savings under pension freedom rules has to take personal financial advice if the fund is worth £30,000 or more.
Which expats qualify for the allowance?
Expats who will find the allowance most useful are:
- Those ready to move permanently abroad who want to switch to a QROPS
- Expats already overseas who want to open a QROPS.
Providing:
- They are less than 55 years old
And
- Have a pension fund worth £30,000 or more invested in a defined contribution scheme
In a consultation document, the Treasury suggests pension savers could access the allowance multiple times – perhaps up to three times – so they could update their financial plans at different stages of their lives.
“The government is committed to ensuring that consumers are supported in making good financial decisions,” said a Treasury spokesman.
“The pension flexibilities introduced in April 2015 gave savers the ability to access their hard earned pension savings flexibly, as best suits their needs. This means that many consumers have a wider range of options to consider when they reach retirement.”
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.
