Retired British expats need to be aware of UK pension rules and changes, experts warn

by Ray Clancy on April 22, 2010

The number of wealthy retired British expats is expected to grow from seven million currently to around 16 million by 2020, according to a new report.

But many may not be aware of significant changes to pension legislation in the UK and could lose out, experts are warning.

The growth figures from wealth manager Meyado Private Wealth Management means there is likely to be a dramatic rise in the number of retired expats wishing to transfer their UK pension to an offshore environment.

The qualified recognised overseas pension scheme (QROPS) market at present is in the region of £400 million and is expected to rise as expats realise the benefits of moving their pension arrangements offshore, said the wealth manager.

Moving pension assets offshore has the advantage of currency options. For example, people retiring in Singapore want to receive their incomes in Singapore dollars. The system has resulted in millions of pounds of assets moving from UK pension schemes and into those administered by pensions trustees based in offshore locations like Guernsey and Isle of Man.

‘One of the benefits of QROPS is the ability for individuals to take control of their pension assets. But is it vital that clients ensure that the control is in the right hands. Annuities may often work in the favour of the pension trustees but they also provide an income for life with a level of guarantee and peace of mind in old age can’t be underestimated,’ said Mark Paine of Meyado.

Expats also need to be aware of a little known Inland Revenue ruling buried in small print could  have significant implications for some pensioners and result in them losing out on a tax free lump sum, according to specialist broker Annuity Direct.

An increasing numbers of people approaching the age of 75 need to plan ahead to maximize their options. It says that pensioners who leave it too late technically run the risk of missing out on claiming their lump sum cash payment.

It also points out that many of those approaching their 75th birthday also risk not being able to take advantage of the ‘open market option’, as the companies which hold their pension funds are not releasing information in time to meet HMRC deadlines.

‘If you are approaching your 75th birthday and are one of the increasing numbers of people who have decided to go to the wire before taking your annuity, it is crucial to give your adviser ample notice in order to make a smooth transition for transferring the funds,’ said Annuity Direct’s Bob Bullivant.

‘We have seen a number of clients who have not been warned in advance by their pension companies as to the dangers of not making arrangements well in advance. Some providers are much more efficient than others, but we would urge anyone who has deferred buying an annuity to be certain of starting to investigate making all necessary arrangements at least six months in advance of their 75th birthday,’ he explained.

‘Otherwise they could face the calamitous loss of their tax free lump sum payment. This is non negotiable with the Inland Revenue once you go past your 75th birthday,’ he added.

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