Pension allowance change prompting expats to move their money

by Ray Clancy on February 24, 2014

British expats are increasingly moving their pensions out of the UK due to a decision by Chancellor George Osborne to reduce the Lifetime Allowance (LTA), according to financial experts.

From 06 April this allowance will go down from the current £1.5 million to £1.25 million and is a cause for concern for the estimated 4.7 million British expats whose pensions are based in the country.

UKpension

There has been a 35% increase in inquiries about transferring pensions, according to financial experts.

The deVere Group, which has 80,000 mainly expat clients worldwide, reports a 35% increase globally in the number of clients inquiring about transferring pensions into Qualifying Recognised Overseas Pension Schemes (QROPS) in January, compared to the previous month.

The news comes three weeks after the firm confirmed a 15% year on year increase in the number of clients transferring pensions into HMRC recognised QROPS, between 2012 and 2013.

The firm says that last month’s upsurge in demand is due to growing numbers of British retirees in countries such as France who are keen to beat the effects of the LTA reduction.

‘As more and more expats become aware of how they could be hit by changes to the LTA limit, a growing number of them are taking steps to mitigate the effects by seeking advice on QROPS,’ said Nigel Green, deVere Group’s founder and chief executive.

‘From 06 April, the amount that can be saved tax free in a pension will fall by £250,000. The reduction in the LTA threshold will put those with retirement funds over this limit at risk of facing taxes of up to 55%,’ he explained.

Green explained that when a UK pension is transferred into a QROPS it is tested against the LTA at that time of transference. ‘This is why, we believe, a growing number of expats, as they are the ones able to do so, are enquiring about QROPS now ahead of 06 April when the Lifetime Allowance drops,’ he said.

‘Once the retirement funds are outside the UK, they will be exempt from the LTA limit even if the pension pot increases beyond £1.25 million in the future.  This is potentially hugely advantageous as it is being mooted by some politicians to reduce the LTA even further over time,’ he pointed out.

‘It is likely that more people than many might expect will be adversely affected by the new LTA limit because the tax will also apply as values of portfolios increase,’ he concluded.

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