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QROPS dilemma for UK expat retiree pensioners
| Published: | 12 Nov at 6 PM |
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Retiring in the sun is the dream of many older Britons, especially since the Brexit referendum.
Expats past the age of retirement make up a sizeable percentage of British nationals living overseas, according to the Office for National Statistics. Portugal and Spain are major UK retirement hubs, with pensioners aged 65 and over accounting for 39 and 42 per cent of the total British expat population respectively in the two countries. In addition, 207,300 of the 784,900 UK-born nationals living in Europe are of retirement age or older. The major and often the only source of regular income for British expat retirees is a pension transfer, whether it’s the UK state pension, work-related or both.
Unfortunately, the present-day fluctuating exchange rates as a result of the Brexit referendum are forcing Britons overseas to cut back or even consider returning to the UK. As a result, many new expats are now moving their pensions overseas in order to avoid currency movements as well as sidestepping high bank transfer charges. Moving a pension abroad means using a QROPS, a product which meets the same, safe standards as do UK pension schemes.
The main reason for utilising a QROPS is that transferring pension savings any other way mean you’ll be hit by a hefty tax charge of 25 per cent of the total amount. The get-out exceptions clause is that, if you’re already resident in the country where your QROPS is based, the charge won’t affect you. In addition, if your chosen retirement destination is in an European Economic Area (EEA) country and your chosen QROPS is in another EEA state, exemption from the tax also applies.
Should you decide to leave your pension in the UK, you’ll need to make monthly transfers to a bank in your new location. Many British pension providers charge fees to move pensions to an overseas bank account, but making monthly payments to a British bank account and transferring to a bank in your new home country also attracts charges as well as possible currency fluctuation downsides. Taking professional advice is the best idea and can save you money in various ways such as fixing your exchange rate, but you should ensure the advice you receive comes from a qualified, forex-experienced source.
Expats past the age of retirement make up a sizeable percentage of British nationals living overseas, according to the Office for National Statistics. Portugal and Spain are major UK retirement hubs, with pensioners aged 65 and over accounting for 39 and 42 per cent of the total British expat population respectively in the two countries. In addition, 207,300 of the 784,900 UK-born nationals living in Europe are of retirement age or older. The major and often the only source of regular income for British expat retirees is a pension transfer, whether it’s the UK state pension, work-related or both.
Unfortunately, the present-day fluctuating exchange rates as a result of the Brexit referendum are forcing Britons overseas to cut back or even consider returning to the UK. As a result, many new expats are now moving their pensions overseas in order to avoid currency movements as well as sidestepping high bank transfer charges. Moving a pension abroad means using a QROPS, a product which meets the same, safe standards as do UK pension schemes.
The main reason for utilising a QROPS is that transferring pension savings any other way mean you’ll be hit by a hefty tax charge of 25 per cent of the total amount. The get-out exceptions clause is that, if you’re already resident in the country where your QROPS is based, the charge won’t affect you. In addition, if your chosen retirement destination is in an European Economic Area (EEA) country and your chosen QROPS is in another EEA state, exemption from the tax also applies.
Should you decide to leave your pension in the UK, you’ll need to make monthly transfers to a bank in your new location. Many British pension providers charge fees to move pensions to an overseas bank account, but making monthly payments to a British bank account and transferring to a bank in your new home country also attracts charges as well as possible currency fluctuation downsides. Taking professional advice is the best idea and can save you money in various ways such as fixing your exchange rate, but you should ensure the advice you receive comes from a qualified, forex-experienced source.
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