Understanding Pension Transfer Charges For Expats
LEARNING OBJECTIVES
We provide high quality, relevant and up-to-date retirement advice to British Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
Reasons to consider transferring your pension overseas
The different fees involved with an overseas transfer
How different pension pots can vary in transfer cost
Important considerations before moving your UK pension
If you live outside the UK and hold one or more UK pensions there are many reasons you may want to transfer your pension.
This article aims to explain the costs and expenses incurred with transferring your pension as an overseas expatriate.
When To Transfer Your Pension Overseas
You can move your pension as part of your retirement planning for various reasons such as:
Consolidation
Reduce charges and simplify the management of your pension policy.
Flexible access drawdown
Gain access to your pension pot from age 55 (57 from 2028).
Ongoing Management
Transferring your pension to an international provider can allow you to work with a locally regulated independent financial adviser firm. They can advise on the investment strategy for your pension investments to meet your long-term goals.
Greater control over your investments
Control how and where your money is invested in line with your risk level and objectives.
Wider investment choice
Access a wider range of investments than you have with your existing scheme.
Multicurrency Options
Invest and withdraw in all major currencies, helping you mitigate against currency risk.
How Much Does It Cost To Transfer A Pension?
Transferring your pension fund does not need to be expensive however the fees will vary depending on the following:
Defined Contribution Pension
Most modern-day personal pensions and workplace pensions are classified as defined contribution schemes. This means the value is linked to how much you have contributed and the performance of the investments held.
When you switch jobs, your old pension becomes a 'frozen pension' and a new one is started with your new employer.
Defined Benefit Pension Scheme
Also known as a final salary pension, the value is calculated on factors such as time worked and your salary at the end of employment.
Final salary schemes provide benefits such as a guaranteed income for life and spousal income in the event of death. If the transfer value is over £30,000 you require advice from an FCA-authorised pension transfer specialist.
By transferring your defined benefit pension you will be giving up the benefits in exchange for a Cash Equivalent Transfer Value. This can then be invested like a defined contribution pension with the value linked to investment performance.
Pension Transfer Fees Explained
Before transferring your UK pension plan, its important to understand all the fees associated with a transfer.
Exit Fees
There may be a pension charge from your existing provider for closing your pension policy. Older pension schemes can charge up to 10% of the total pension value.
Market Value Reduction (MVR)
If your pension has 'with profits funds', transferring out can reduce the overall value of your pension pot. There may however be a 'terminal bonus' depending on stated retirement age of the policy.
Setup Fees
Your new pension provider may charge setup fees. International SIPPs start at zero setup and go up to £500. QROPS range from £750 to £1500.
IFA Fees For Pension Transfer
Independent Financial Adviser fees vary depending on the company you work with. They range from flat fees to percentages. Any fees incurred need to be made back before you can achieve any growth.
At The Wealth Genesis, we charge a flat fee of £3000 for transferring one or consolidating several pensions. There are no hidden fees or fees of any other kind.
International Financial Advice
The Wealth Genesis is regulated in multiple jurisdictions to provide independent, unbiased and flat-fee financial advice to British Expats around the world.
To understand how we can help you, schedule an initial free consultation using the diary below, or follow the Get Started button to make an enquiry.
FAQs
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Ongoing fees vary per advisory firm ranging from 1.5% per annum to 0.5%. The Wealth Genesis charges 0.85% management fees on the value of your pension savings. This covers regular reviews, any changes where necessary due to the financial markets or your requirements changing.
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This depends on the type of pension you hold and whether you want to help to select the new pension provider, investment platform, and investment funds.
If your retirement savings are in a defined contribution scheme, and you do not want any assistance on products or asset allocation, you do not need to take financial advice.
However, be aware of any hidden platform fees and additional fees and charges from the pension provider. These can include buying funds, withdrawals, changing currency, and minimum account balances.
If you have a defined benefit pension and the value is over £30,000, you have to receive advice from an FCA-regulated specialist.
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The OTC refers to the charge applied in the event you transfer to a QROPS Qualifying Recognised Overseas Pension Scheme and you reside outside the European Economic Area. The charge is 25% of the pension value at the time of transfer.
