UK Expat Pension Transfers Explained

If you choose to leave your UK pension scheme, it’s worth remembering that the benefits you’ve built up still belong to you. If you’ve made a decision to leave your pension, you have the option to transfer your benefits to another scheme, which could be based abroad in The Middle East.

If you’re living or working abroad, and have pension benefits held in one or more UK schemes, you may want to think about transferring these overseas. It’s worth noting that your UK pension benefits can only be transferred to an overseas pension scheme if it’s recognised by the UK tax authorities and meets certain criteria. The requirements are that the scheme is:

  • Regulated as a pension scheme in the country where it’s established
  • Recognised for tax purposes (so that any benefits paid to you from the scheme can be taxed if appropriate).

Important pension transfer facts to keep in mind – The Middle East

If you are considering transferring a pension there are some factors which it can be useful to think through. You may need to compare the cost and charges of your current scheme against the new scheme, and think about whether you’ll lose any protection or guarantees from your existing scheme by moving. Also, investigate whether you’re gaining greater flexibility about how you access benefits or will enjoy a better tax treatment when you draw benefits under the new scheme. It’s also useful to find out how the new scheme will be invested, managed and how this is paid for.

Who can transfer their pension abroad?

Generally, anyone with a UK pension scheme has the right to transfer it to any Recognised Overseas Pension scheme willing to accept them. It’s worth remembering that there might be a 25% tax charge if you’re not resident in the same jurisdiction as the pension scheme or resident in EEA. The liability to this charge remains in place for five years. Additionally, if the value of the benefits you are transferring exceeds the Lifetime Allowance (LTA), it could trigger a tax charge. This is also the case if a protected LTA has been applied for and that amount is exceeded. The Lifetime Allowance is a limit on the amount of pension benefit that you can accumulate in your fund without incurring additional tax charges when you begin taking benefits from your pension scheme.

There are some UK pensions which can’t be transferred. These include the UK State Pension, certain former employer schemes already in drawdown, Civil Service and Armed Forces pensions (for example NHS, police, teacher, fire services), Council schemes, an employer scheme you still pay into, any annuities already purchased or any pension held within the Pension Protection Fund.

What are the important rules to know about expat pensions?

There are four key areas which it’s useful to understand when considering an expat pension:

  • How and when can I access my benefits?
  • What are the upfront and ongoing charges?
  • How will it be taxed and do any Double Taxation Agreement conditions apply?
  • How will it be invested?

Where can I find a list of qualifying schemes?

Although overseas pension options were originally referred to as Qualifying Recognised Overseas Pension schemes or QROPS, the reference to ‘qualifying’ is no longer used. The schemes are now referred to as Recognised Overseas Pension schemes or ROPS as HMRC was keen there was no suggestion that they were in some way endorsing schemes. A list of ROPS can be found on the HMRC website.

The list is updated twice a month, on the first and 15th day.

What are the potential benefits of transferring my pension abroad?

There are a number of benefits of transferring a pension abroad. It may make sense from a tax perspective and offer more efficiencies or a favourable tax treatment. An overseas scheme may also offer more flexible benefits, which better suit your situation. Moving to a pension abroad can also remove you from any future tests relating to the Lifetime Allowance, which again may help eliminate unnecessary tax charges.

What are the potential risks of an expat pension transfer and how can I avoid them?

It’s important to consider some of the associated consequences of moving your pension overseas. For example, you may lose access to existing or valuable benefits and guarantees. You could face initial charges and fees, or have to pay potentially high ongoing costs. You also need to take care that your new scheme still offers the same level of flexibility when you need to access your benefits. Finally, do consider whether a transfer will trigger any tax penalties such as a Lifetime Allowance charge or overseas transfer charge.

Considering moving your pension abroad is an important step, and it is vital to speak to an expert to discuss your personal situation. Please contact your nearest office for help and advice.

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