When Sam and Mary Davies* put their retirement plan to move to France into action, the logistics went smoothly. And with a bit of solid financial advice, they also managed to save thousands of pounds for their retirement fund.
Having sold their property in the UK for approximately £750,000, they researched currency conversions to avoid unattractive exchange rates and a transfer that would have cost them thousands of pounds. And by selling existing Isa investments they were also able to reduce the impact of income tax liabilities in France.
As the Davies discovered, retirement planning can be fairly complex, so the sort of professional advice they received can bring significant benefits, including tax savings, greater control over your financial affairs and the option to hedge your pension pot in multiple currencies. But it's important to remember it's never too soon to start planning, and that retirement plans could – and should – be made as far in advance as possible, with constant and regular reviews.
James Sumpter, financial planning director at Bestinvest, says there are numerous pertinent questions expats need to ask themselves before making any decisions. "How will any income from state, occupational pensions and annuities be taxed in my new country of residence? Are there any taxes in my new country of residence that I don't have in my home country (wealth tax for example) that I should plan for? Where will I actually end up retiring to and living?"
He also suggests looking into medical care as you may need to make separate provision for this. Also, from a tax perspective, you should look into how many days you will be allowed to spend in a particular country before being deemed a tax resident there.
Needless to say, this is a very complex area, and sound professional advice is important. There are many factors to consider: your own circumstances; the nature and benefits offered by your existing pension; your plans for the future; the tax regime where you are based; and the country you expect to retire to.
For instance, one of the big questions expats from the UK specifically face is whether they should keep existing pensions policies in place or transfer them to a Qualifying Recognised Overseas Pension Scheme (QROPS). Any UK pension can be transferred to a QROPS as long as an annuity has not been purchased or, if it's a final salary scheme, the pension has not started. The amount of tax you pay on income and capital received from your QROPS will then be determined by the taxation of the country in which you're based. This was the final part of the jigsaw for the Davies, whose QROP was denominated in euros which then provided a gross euro income as part of the double taxation treaty agreement in place.
QROPS may be good for anyone with UK pension rights that intends to retire permanently overseas, but aren't suitable for everyone. It's important to assess whether that particular scheme, or others that are non-UK focused, are suitable. Paul Garwood, head of personal financial planning at Smith & Williamson, says: "The first thing to look at is the tax jurisdiction where you're living," he explains. "How will the pension be taxed and is there a double taxation agreement?"
Retirees also need to look at the different retirement income options from a pension – ie cash lump sum, guaranteed annual or monthly income, or a combination of the two.
An annuity is a guaranteed income for life that is purchased from an insurance company in return for a lump sum of capital. You don't have to buy an annuity with your pension fund though. Since April 2006, an individual can draw an income from the pension fund's underlying assets, subject to minimum and maximum limits set by the government.
A self-invested personal pension plan (SIPP) is another option for expats. SIPPs give individuals the choice to invest in a wide range of asset types and be in control of their fund. Capital and income can be accessed from the age of 55. At this time, it's possible to provide a lump sum of 25% tax free and, depending on where you are in the world, a tax free income via a double taxation agreement.
Other factors to discuss with a professional adviser are whether Isas, unit trusts or investment bonds remain tax efficient and should continue to be part of the retirement planning process. And finally there is the added dimension of establishing a single, central location to control your savings and investments, the amount of risk you're willing to take at any particular stage of your expat life (as not forgetting the lives of those you may leave behind), and to make the most of any potential tax efficiencies. In short, retiring abroad is a complicated business and it's vital to get the right advice from a trusted professional.
Source: http://www.guardian.co.uk/hsbc-expat-guide/help-with-retirement-planning?newsfeed=true
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| One of the big questions expats from the UK specifically face is whether they should keep existing pensions policies in place or transfer them overseas. |
Having sold their property in the UK for approximately £750,000, they researched currency conversions to avoid unattractive exchange rates and a transfer that would have cost them thousands of pounds. And by selling existing Isa investments they were also able to reduce the impact of income tax liabilities in France.
As the Davies discovered, retirement planning can be fairly complex, so the sort of professional advice they received can bring significant benefits, including tax savings, greater control over your financial affairs and the option to hedge your pension pot in multiple currencies. But it's important to remember it's never too soon to start planning, and that retirement plans could – and should – be made as far in advance as possible, with constant and regular reviews.
James Sumpter, financial planning director at Bestinvest, says there are numerous pertinent questions expats need to ask themselves before making any decisions. "How will any income from state, occupational pensions and annuities be taxed in my new country of residence? Are there any taxes in my new country of residence that I don't have in my home country (wealth tax for example) that I should plan for? Where will I actually end up retiring to and living?"
He also suggests looking into medical care as you may need to make separate provision for this. Also, from a tax perspective, you should look into how many days you will be allowed to spend in a particular country before being deemed a tax resident there.
Needless to say, this is a very complex area, and sound professional advice is important. There are many factors to consider: your own circumstances; the nature and benefits offered by your existing pension; your plans for the future; the tax regime where you are based; and the country you expect to retire to.
For instance, one of the big questions expats from the UK specifically face is whether they should keep existing pensions policies in place or transfer them to a Qualifying Recognised Overseas Pension Scheme (QROPS). Any UK pension can be transferred to a QROPS as long as an annuity has not been purchased or, if it's a final salary scheme, the pension has not started. The amount of tax you pay on income and capital received from your QROPS will then be determined by the taxation of the country in which you're based. This was the final part of the jigsaw for the Davies, whose QROP was denominated in euros which then provided a gross euro income as part of the double taxation treaty agreement in place.
QROPS may be good for anyone with UK pension rights that intends to retire permanently overseas, but aren't suitable for everyone. It's important to assess whether that particular scheme, or others that are non-UK focused, are suitable. Paul Garwood, head of personal financial planning at Smith & Williamson, says: "The first thing to look at is the tax jurisdiction where you're living," he explains. "How will the pension be taxed and is there a double taxation agreement?"
Retirees also need to look at the different retirement income options from a pension – ie cash lump sum, guaranteed annual or monthly income, or a combination of the two.
An annuity is a guaranteed income for life that is purchased from an insurance company in return for a lump sum of capital. You don't have to buy an annuity with your pension fund though. Since April 2006, an individual can draw an income from the pension fund's underlying assets, subject to minimum and maximum limits set by the government.
A self-invested personal pension plan (SIPP) is another option for expats. SIPPs give individuals the choice to invest in a wide range of asset types and be in control of their fund. Capital and income can be accessed from the age of 55. At this time, it's possible to provide a lump sum of 25% tax free and, depending on where you are in the world, a tax free income via a double taxation agreement.
Other factors to discuss with a professional adviser are whether Isas, unit trusts or investment bonds remain tax efficient and should continue to be part of the retirement planning process. And finally there is the added dimension of establishing a single, central location to control your savings and investments, the amount of risk you're willing to take at any particular stage of your expat life (as not forgetting the lives of those you may leave behind), and to make the most of any potential tax efficiencies. In short, retiring abroad is a complicated business and it's vital to get the right advice from a trusted professional.
Source: http://www.guardian.co.uk/hsbc-expat-guide/help-with-retirement-planning?newsfeed=true
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