Gulf News July 25 2009
28 July 2009
I have recently moved from the UK to Dubai to work, and intend to live in the Far East when I retire. I have 20 years retirement savings in the UK with my previous employer. What options could I consider for this money?
Now is a good time for many British expats living, or preparing to live abroad, to start making key decisions about their personal finances, especially since the UK government recently introduced a new higher tax bracket. A good proportion of those living and working in places such as the UAE, where salaries are tax-free, could benefit from transferring all their existing monies into a Qualifying Recognised Offshore Pension Scheme (QROPS). On paper QROPS sounds like a complicated scheme, all the rules and criteria are laid out clearly in Her Majesty’s Revenue & Customs (HMRC) documentation. However, with the advice of an independent financial advisor, the best product, with the right tax jurisdiction, could provide real opportunities for some. Applying the rules correctly, and ensuring they are not broken, is especially important as punitive charges can be incurred if the scheme is not set up properly, or if it does not conform to HMRC rules. Previously an individual had to be residing in the country to which they wanted to transfer their pension fund. But, this is no longer a requirement and migrants can now transfer their pension to the jurisdiction that offers the most tax advantages to them. As a condition of being granted QROPS status, you will have to agree to report all payments made to you from the scheme in the first five complete UK tax years of your overseas residency to the HMRC – this period is known as the ‘reporting period’. During these five years, no payment can exceed the allowable UK Government Actuary’s Department (GAD) limits, and must not be made before the retirement age of 50, increasing to 55 year from 6 April 2010. After you have completed five years of residency outside the UK, the reporting period falls away, which is when the significant advantages of the scheme start to come into play. These include: · no requirement to purchase a compulsory UK annuity within QROPS · low minimum transfer value and no age restrictions on plan entry · potential to access 100% tax free benefits · flexibility of choosing your own investment strategy · ability to hold unique investment vehicles · increased flexibility in terms of accessing benefits · wide-range of investments including cash, bonds, property, hedge, equities and commodity funds · retainable pension funds in the currency of your new country, removing exchange rate risks · free to pass pension fund to beneficiaries on death, without incurring inheritance tax · tax breaks for funds approaching UK lifetime allowance of £1.75 million, 2009/10 tax-year
By William Iain McIntyre, a chartered financial planner at Nexus.