Thread: British Pension when living in Europe Questions

Great to finally be a part of Brits Abroad!

I have been an expat for 12 years now and although I have browsed the boards from time to time here I have decided to become an active member.

One thing that strikes me is that there are a LOT of questions regarding what the situation is with the government's QROPS scheme which entitles us to claim our UK pensions free of tax when we reside out of the UK, and leave them to our families free of inheritance tax.

I myself have gone through the process so anyone with questions about whether it is suitable for them I will be happy to help (of course the advice is totally free and I will simply try and save you the complications I went through).

Great to be here once again.

Alfie

Originally Posted by Alfie

Great to finally be a part of Brits Abroad!

I have been an expat for 12 years now and although I have browsed the boards from time to time here I have decided to become an active member.

One thing that strikes me is that there are a LOT of questions regarding what the situation is with the government's QROPS scheme which entitles us to claim our UK pensions free of tax when we reside out of the UK, and leave them to our families free of inheritance tax.

I myself have gone through the process so anyone with questions about whether it is suitable for them I will be happy to help (of course the advice is totally free and I will simply try and save you the complications I went through).

Great to be here once again.

Alfie

There are a few points I would make about this.

1. The QROPS are not Government QROPS- there is no approval system in place. They are all private companies.
2. The tax on the income (and lump sum in some places like Spain- for example ) is decided by the Double Tax Treaty between the state of tax residency and the jurisdiction of the QROPS. They are not "tax free" in Europe. The income must be declared.
3. Inheritance Tax is not charged on UK schemes and also not charged on QROPS.
4. In most cases , for expats, QROPS are not suitable when compared to UK alternatives.

Only take advice from someone with specific pension qualifications with a clear charging structure.

Alfie, going through the process is one thing. The pension you have at the end will be the determiner.

Hi Brambor,

Just to clarify:

1.) QROPS stands for Qualified Recognised Overseas Pension Scheme, it is government *legislation* which provided the right to QROPS schemes, as you correctly stated administered by companies (just as UK schemes are, except public schemes which can no longer be transferred anyway), to accept UK pension transfers as they were deemed as safe or safer than the standards held in the UK.
2) Tax on income always depends of double taxation agreements, that goes without saying. However, the UK has just that with the majority of european countries anyway.
3) Inheritance tax is still effectively charged on UK schemes if the pension holder is 75 years old or older, given the average age at present is several years above that and expected to rise as it has done for decades the majority of UK expats will leave their families their pensions *fully subject to income tax*, whereas in a QROPS scheme it may not be depending on circumstances (please read this article in the telegraph to update your knowledge on the pension reforms where this is stated explicitly: http://www.telegraph.co.uk/finance/p...-answered.html
4) This is a general comment which holds no weight, as would the a comment that "for many people heart medication isn't preferable". Whilst QROPS may not be suitable for some, for others it would seem the obvious choice (i.e. those who may plan to retire in Malta or one of the many countries with double taxation agreements and 0% tax boundaries such as Bahrain). They would be able to leave their pension's to their families free of UK tax which otherwise, as mentioned, can be as high as 45% income / inheritance tax *even whilst living abroad*.

With all due respect I believe your ideas of QROPS may be slightly skewed or perhaps simply not updated to take into account the April reforms. "UK solutions" do not provide tax relief in a manner even remotely similar to QROPS schemes for expats who plan to retire abroad permenantly.

Kind Regards,

Alfie

Originally Posted by Brambor

There are a few points I would make about this.

1. The QROPS are not Government QROPS- there is no approval system in place. They are all private companies.
2. The tax on the income (and lump sum in some places like Spain- for example ) is decided by the Double Tax Treaty between the state of tax residency and the jurisdiction of the QROPS. They are not "tax free" in Europe. The income must be declared.
3. Inheritance Tax is not charged on UK schemes and also not charged on QROPS.
4. In most cases , for expats, QROPS are not suitable when compared to UK alternatives.

Only take advice from someone with specific pension qualifications with a clear charging structure.

Alfie, going through the process is one thing. The pension you have at the end will be the determiner.

Alfie,

To be clear, I work for a firm of Chartered Financial Planners, I am level 6 and hold G6O and other specialist pension papers. I think I am very much up to date. I am constantly in touch with HMRC.

We have UK pension transfer permissions and can deal with final salary pensions unlike nearly all the firms in this market. We have MiFiD licences for the EU and offices inside and outside the UK. In the vast majority of cases, we recommend clients not to transfer to a QROPS. They are expensive and invariably offer nothing extra to a UK alternative, apart from a smaller fund at retirement. Sipps cost circa 150 GBP pa, for example. Have you seen the QROPS fees?

Most people we deal with are in the 35 to 55 age range and we would not recommend a transfer to avoid an income tax on beneficiaries on an event that is 20 to 40 years in the future. The rules are bound to be different. It is often best to wait until actual retirement and then see if a QROPS is a better choice. I don't know why you mention Inheritance Tax, the tax over 75 is income tax based on the individual who may have their own personal allowances and not pay tax at all. People need the best income possible for retirement, when we talk this through with them we find a secure retirement is paramount and to transfer based on a tax that may not even be there after 75 is a low priority.

Have you any idea how large a fund would be needed to be taxed at 45%. This is for income over 150,000 GBP pa- so a fund would need to be many millions of pounds in size. I have seen the QROPS adverts too.

Funded Public Sector Pensions can still be transferred- though it would not make financial sense to do so.

My advice for expats.... When you meet a financial adviser check the following

1. The firm has a MiFiD licence in the EU or equivalent investment licences outside the EU. A basic insurance licence used by most does not cover investment advice and means you will be sold an expensive commission laden insurance bond that pays a fat 7 to 8% commission to the salesperson.
2. Only work with advisers that have a set fee that they quote at outset before they give any advice- avoid the offer of free financial advice as the salesperson is refusing to disclose commissions- Commission is deducted from the funds to pay the salesperson and has a very detrimental effect on savings.
3. Make sure the adviser has G60 or AF3 pensions qualifications. Without them, the adviser is not qualified to advice on transfers from UK schemes.
4. Check the experience and past and get references from previous employers.

Hi Alfie
As a pensioner living in Spain are there any other benefits that I would be eligible for, ie social housing, pension credits, housing benefit as I would be able to claim at home in UK.

Regards Dave