The Benefit Of Offshore Pensions For UK Expats
LEARNING OBJECTIVES
We’re passionate about providing high quality, relevant and up-to-date retirement advice to British Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
How an offshore pension scheme works
The types of schemes available to British Expats
Key benefits of transferring your UK pensions offshore
Considerations before taking financial advice
Offshore pensions can be an attractive option for UK expats due to several financial and tax advantages. These schemes allow expats to build and manage retirement savings outside the UK.
This article aims to outline the types of offshore pensions available and the key benefits of using an offshore pension scheme for UK expats.
What Is An Offshore Pension Scheme?
An offshore pension scheme also known as an overseas pension scheme is a retirement savings plan that is established in a jurisdiction outside of the UK.
These schemes allow you to save and manage your pension funds while taking advantage of tax efficiencies, investment flexibility, and other benefits offered by the offshore jurisdiction.
Types Of Overseas Pension Scheme
There are two main types of offshore pension schemes.
Qualifying Recognised Overseas Pension Scheme (QROPS):
A QROPS is an overseas pension scheme that meets specific requirements set by HMRC. It allows individuals with UK pension funds to transfer their pension savings to a scheme based outside of the UK.
Qualifying Non-UK Pension Scheme (QNUPS)
A QNUPS is an overseas pension scheme that allows individuals to save for their retirement outside of the UK while providing certain tax advantages, particularly inheritance tax (IHT). Unlike a QROPS, which is specifically designed for transferring UK pensions abroad, a QNUPS allows individuals to make additional contributions to their pension funds without being subject to UK pension contribution limits or inheritance tax.
QNUPS are mainly beneficial for UK residents, particularly high-net-worth individuals, members of overseas schemes wanting greater control, and those with UK IHT concerns.
Key Benefits Of A QROPS
Tax Efficiency:
Once pension funds are transferred into an HMRC QROPS, you are no longer subject to UK taxes on your pension income, provided you are a tax resident in your new country of residence.
Investment Flexibility:
QROPS schemes offer a wider range of investment options than UK pensions, allowing for greater portfolio diversification across international markets. This can potentially lead to higher returns and better protection against market or currency fluctuations.
Mitigate Currency Risk:
QROPS can hold and distribute pension funds in various currencies (such as GBP, USD, EUR), providing flexibility for expatriates living in countries with different currencies. This reduces the risk of exchange rate fluctuations and eliminates the need for frequent currency conversions.
Estate Planning and Inheritance Tax Benefits:
In the UK, pension funds may be subject to inheritance tax at a rate of 40% if passed on to beneficiaries. QROPS schemes are generally outside the scope of UK inheritance tax, allowing you to pass on their pension wealth more efficiently.
Retirement Planning Flexibility:
Flexible Access: Take pension withdrawals in any form you require including regular, ad-hoc lump sums, or a combination of the two.
No requirements to buy an annuity: Unlike standard UK pensions there are no requirements to purchase an annuity upon reaching the normal retirement date.
Offshore Financial Advice
Qualifying Overseas pension schemes are a valuable tool for UK expats looking to transfer their UK pension funds overseas while enjoying tax benefits, investment flexibility, and enhanced control over their retirement savings.
It offers significant advantages if you intend to retire or access your pension from abroad.
The Wealth Genesis helps expats throughout the world navigate the complexities of QROPS pensions. Our financial advisers ensure the chosen scheme aligns with your individual financial goals while factoring in the tax considerations of your country of residence.
To get started, use the diary link below to schedule an initial free consultation with a member of our team.
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Yes, you can however if the value of your defined benefit scheme is over £30,000 you require advice from an FCA-authorised UK adviser.
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Yes, depending on where your retirement benefits are held. All UK pension benefits can be transferred to a QROPS. Non-UK schemes such as 401k, IRA or Bermudian overseas schemes cannot.
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No, the FCA can only regulate UK pensions. As all QROPS are held outside the UK they cannot be regulated by the FCA. You can however utilise an FCA-regulated product within the QROPS to mitigate any jurisdictional risk.
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You can check the recognised overseas pension schemes list here.
