Guide to Overseas Pensions

Our Hertfordshire Financial Planners understand that we are living in an increasingly small world. More and more industries require their professionals to travel or even rebase for their work. It is not surprising then that the majority of Brits don’t see the UK as their ideal retirement destination.

The UK’s colonial past and EU membership ensures its citizens ample choice for spending their retirement in another country. But even with these special diplomatic provisions, organising the taking of your pension pot to another country can present some unique challenges.

Retiring abroad

Recognised Overseas Pensions Schemes (ROPS) are pension schemes which HMRC recognises are meeting certain criteria. Generally speaking, ROPS have to be largely in line with how pension schemes in the UK operate.

The advantage of ROPS is that UK pension savers can transfer UK pension schemes to them without having to pay (a minimum of) 40% tax. This has of course both made choosing a ROPS and gaining ROPS status highly desirable.

The importance of HMRC’s recognition of a pensions scheme became the focus of media attention after an incident in 2008. The incident resulted in the removal of Rosiip from the QROPS list, as it was then known. 122 pension holders were then made to pay a 55% charge to HMRC for making a transfer to a non-recognised scheme.

Using a ROPS will allow you to transfer your savings overseas and enjoy them via that scheme. The scheme will pay into a bank account in your new country of residence.

You can still receive a UK state pension when you retire abroad, however it won’t receive annual increases unless: you live in the European Economic Area, Switzerland, a country with a special agreement with the UK, or spend more than six months of each year in the UK

Returning to the UK to retire

British citizens can continue to pay into UK pensions schemes when abroad. However, where savers based in the UK can receive pension tax relief on their contributions, this is not ensured for those contributing from other countries. Furthermore, any contribution made may be weakened by currency exchange rates and fees.

If you wish to transfer an overseas pension to a UK pension scheme, to avoid unauthorised payments charges, your overseas scheme must be a Qualified Recognised Overseas Pensions Scheme (QROPS).

More information on what qualifies a scheme can be found at HMRC’s website. If you are thinking of retiring and are considering taking up residence in another country, consult with gpfm’s financial managers today at enquiries@gpfm.co.uk, or call 01992 500 261 now.