Can I transfer my Pension Abroad? Expat Pension Transfers Explained
A pension transfer is the process of moving your retirement savings from one pension provider to another. Read our guide on expat pension transfers to learn more.
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Pensions form the bedrock of retirement planning, providing financial security when you stop working.
Pension transfers can help ensure your retirement plans remain on track if you plan on spending your golden years overseas. And for UK expats, especially those living in Asia, understanding international pension transfers is essential.
In this guide, we explore pension transfers. We will examine whether you can transfer your pension abroad, the options available and other key information you need to consider.
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Should I Transfer My Pension?
It's not uncommon for people to have multiple workplace pension funds as they move around during their careers.
On top of this, more people are taking out private pensions. UK government datashows that members contributing to personal pensions increased by 7% in 2021/22 to 7.5 million.
For many, consolidating their UK pensions into a single pot is a preferable and streamlined approach.
A pension transfer is the process of relocating your pension savings from your current scheme to a new provider or scheme. There are various people may choose to transfer their pension, including:
Reducing Charges
Managing pensions with multiple providers can often result in escalated costs and fees. Consolidating these into a single pot may lead to reduced charges and a more advantageous financial deal.
Retiring Abroad
For those contemplating retirement abroad, pension transfer can be a strategic move to maximize retirement savings by mitigating currency exchange rate risks.
Expanding Investment Choices
Different schemes and providers may offer more varied investment options. Transferring your pension can open the door to a broader spectrum of investment opportunities.
Simplified Management
Consolidating your pensions can streamline tracking and management, reducing admin tasks and paperwork.
Can I transfer my Pension Abroad?
UK expats looking to retire abroad may find that transferring their pension to an overseas scheme or provider has several benefits. For instance, receiving your pension in the local currency can shield your retirement income from currency rate fluctuations.
When considering an overseas pension transfer, UK expats have several options, such as:
QROPS
A Qualifying Recognised Overseas Pension Scheme (QROPS) adheres to the regulations set by HMRC. This means they can accept transfers from UK-registered pension schemes.
They offer the advantage of extracting up to 30% of your pension pot tax-free under UK law. However, a 25% transfer tax may apply under certain conditions.
SIPPs
A Self-Invested Personal Pension (SIPP) falls under the defined contribution pension category and is a pension wrapper.
In a SIPP, the holder is in charge of investment decisions. They typically offer a wider variety of investment choices, granting more control and flexibility over pension savings.
QNUPS
Qualifying Non-UK Pension Schemes (QNUPS) are overseas pension schemes without residency restrictions.
They can't receive UK tax-relieved pension transfers. However, they can accommodate a variety of assets, including stocks, shares, and even unconventional investments like art and wine.
Expat Pension Transfers - Key Considerations
The decision to transfer your retirement fund should not be approached lightly. Here are some of the things to consider before initiating a transfer:
Pension Benefits
Your current provider may offer specific retirement benefits or guarantees, such as an annuity rate or a lifetime guaranteed income in a Defined Benefit pension scheme. These benefits might be forfeited upon transfer.
Retirement Income
Assessing the financial implications of a transfer is crucial. Tax treatment and double taxation agreements can significantly impact your overall retirement income.
Fees and Exit Charges
Be vigilant about any transfer fees or exit fees you might incur.
Scheme Rules
The typical retirement age at which you can access your pension is typically 55. This is governed by the scheme's Protected Pension Age (PPA). Some schemes may have a PPA below 55, and these rules vary from scheme to scheme.
Types of Pensions Eligible for Transfer
Most pension products, barring the UK State Pension, are transferable.
There are two primary pension types in the UK:
Defined Contribution Pension
Most workplace pension schemes fall under this category. A SIPP is also defined as a contribution personal pension and allows you to choose your investment paths. The value of your pension pot at retirement is determined by your and your employer’s contributions, coupled with investment performance over time.
Defined Benefit Pension
Also known as career average or final salary pensions, DB schemes are more prevalent among public sector employees. They offer a guaranteed income for life, typically based on your employment duration and final salary.
How to Transfer a Pension
First, you must check with your current pension provider that you are eligible to transfer your pension to another scheme or provider.
To start the process, you must know the transfer value of the pension. This is the Cash Equivalent Transfer Value (CETV) for defined benefit pensions. It is simply the transfer value (TV) for defined contribution pensions.
This information is obtainable from the scheme administrator or pension provider. If you are unsure of the provider's details, you can use the government's Pension Tracing Service.
Visit MoneyHelper for more information on the transfer process for defined contribution and defined benefit schemes.
If you have a guaranteed pension worth more than £30,000, you must seek advice from an FCA-regulated financial adviser by law. The adviser must have permission to advise on pension transfers and pension opt-outs. This is also referred to as a pension transfer specialist.
The Role of a Pension Transfer Specialist
Before transferring your pension abroad, careful consideration is required. In some cases, professional advice is not only recommended but legally required.
A pension transfer specialist possesses the qualifications and experience to assist with expat pension transfers. They can help you make informed pension choices and find the right products for your needs.
Holborn Asia offers independent, professional advice and wealth management solutions. Our retirement specialists provide the tailored advice and support you need to reach your financial goals.
We are part of the wider Holborn Assets Group, a leading, award-winning financial advisory company with over $2 billion in assets under management (AUM).
Make sure your pension is performing as it should and keep your retirement goals on track. Book a free, no-obligation meeting today to learn how we can help you.
Frequently Asked Questions
What are the main benefits of transferring my pension as a UK expat? The primary benefits of transferring your pension include potential tax efficiencies, better alignment with your lifestyle as an expat, reduced currency exchange risks, and access to a broader range of investment options. Transferring to schemes like QROPS or SIPPs can also offer more flexibility in terms of how and when you can access your pension.
