Monday, November 26, 2012

Which Offshore - answer to British expat offshore pension plans

British expat overseas pension plans
Expat offshore pension funds - enjoy a peaceful retirement (Photo by Fouquier)

"Well, the job prospect is better over there, not to mention cheaper schools for my kid," someone who heading to Australia told me the other day. Another Brit we know headed to Singapore two months back with his family citing higher pay and a change in environment. Coincidentally, both were pondering about what to do with their company pension scheme that they have signed up for while working in the UK.

The one heading to Australia is certain that his pension would be fully transferable from the UK to Australia. The one already in Singapore has his pension plan stranded in the UK. There are of course a whole host of problems with that.

The risks associated with a UK pension

First and foremost, there's the currency risk. The Sterling has depreciated more than 30% since 2008 - who knows what would happen two decades down the road? If one so decide to retire overseas, the last thing one needs is a huge cut in the retirement fund.

Next on the list is the UK tax ruling on pensions based in the country. While you would be able to withdraw a lump sum of 25% of your pension tax free when you hit 65, the pension income thereafter will be subjected to UK tax despite you living overseas, unless the country where you live in has a pension tax agreement with the UK.

Is QPROPS pension the answer?

With the whole list of considerations at hand, that's where Which Offshore steps in. It offers not only pension advice from a tax perspective for Britons who have relocated overseas but also how best to optimise returns by means of setting up an offshore pension plan.

One way of reducing the currency risk as well as maintaining the flexibility of pension withdrawal as well as assets invested in is to transfer an existing UK pension to an HMRC recognised one abroad. The Qualifying Recognised Overseas Pension Scheme (or QPROPS pension) introduced in 2006 allows non-UK residents do just that. By allowing for the transfer of both UK private and company pensions offshore (tax free), it removes the restrictions that UK based pensions face. That includes the cap of 25% withdrawal at age 65;(QPROPS has no such restrictions), the need to buy an annuity after that, which means that it would not be passed onto your estate upon death, at least not fully.

What else at Which Offshore? 

Besides providing information on QROPS, Which Offshore also provides a rather comprehensive guide on living in the world's major commercial cities. For each city, the guide covers areas that include business culture, accommodation, transport, healthcare, education, entertainment and lifestyle (I couldn't have added much to the write up on Singapore). There is even a section on working on a yacht - the roles to be had, qualifications required, what to expect and most important of all - how to make it financially worthwhile.

There's also a small Tools section at Which Offshore that offers a Family Savings and Inheritance Tax calculators. While the figures calculated can be quite depressing, they do provide you with an estimate of how much you are looking at and whether you are setting aside enough for when the time comes.

Relocation is a stressful affair to say the least especially if you are moving your family as well. Before you take the plunge, it'd be worth your while to have a look at Which Offshore to check out how best allocate your resources.

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