However, the world of
pension transfers can seem complicated, with multiple different types of scheme
with varying pros and cons.
Many Chase Buchanan
clients come to us for help managing a combination of pensions, to find the
best way to combine or utilize them – these can include:
·
Private pension plans
·
Personal Self Invested Pension
·
Overseas pension provisions
·
Restructuring pensions for expats
·
Auto-enrolment pensions
·
Employer pension schemes
·
Government pensions
Let’s walk through how
pension transfers work, what your options are, and how using a financial
adviser can maximize your income streams throughout your retirement.
Pension Transfers Explained
Your pension works like any investment; you make payments into
the scheme, which is invested depending on the type of plan, and the level of
selected risk exposure.
Pension transfers are a
way of directing your pension fund to a different product, investment plan or
provider. This is an excellent way of managing your retirement budget, having
control over how and where it is invested, or consolidating multiple plans into
one, easy to access, scheme.
Reasons to Transfer your Pension
There are many different scenarios in which it may be beneficial
to transfer your pension – both from a financial, and a security point of view!
These include:
·
Consolidating multiple pension plans for better growth.
·
Opting for a pensions provider who offers the investment
potential you would like.
·
Reducing your fees.
·
Choosing pension investment plans with higher income.
·
Revising your risk exposure.
·
Relocating your pension scheme to another country if you live,
or are moving abroad.
·
Making the pension tax efficient in your country of residence
·
Making your pension easier to access and manage.
The
key to successfully managing your pension is to work with an experienced
financial adviser.
With so many options
available, the crucial factors are:
·
What you want to achieve from your pension funds.
·
Structuring your pension around your plans.
Pension Transfer Options
One of the top reasons to
use a wealth management consultant to transfer your pension is that you plan to
move abroad or are already an expat living overseas from your country of
origin.
If you are considering
transferring your pension, a pensions adviser will talk to you about your
plans, and what sort of UK pension for
expat structure would best suit you.
This includes
consideration of lots of factors:
1.
Where you plan to live when you retire.
2.
What plans you currently have, and whether there are any
restrictions on moving those plans (such as exit fees).
3.
Your tax status, and how changes to your pension scheme will
impact you.
4.
What sort of risk exposure your investment funds have, and what
level of risk you feel comfortable with?
5.
Plans for the future, and whether you have any purchases, costs
or investment plans that will require the release of a lump sum of cash.
6.
When you wish to retire.
It is essential to work
through these questions to draw up a comprehensive understanding of your
financial position and aspirations.
Once your adviser knows
what you wish to achieve, they can get to work planning and strategizing to put
your pension funds to work!
Benefits of Pension Transfers for Expats
If you live overseas from
your country of origin or plan to retire abroad, then your pension planning is an important consideration. One strategy to
think about is a ROPS – a Recognized Overseas Pension Scheme – we’ll explain
this in a little more detail below.
The primary benefit to
choosing such a scheme is that expats have the option of choosing to release a
lump sum, without any tax liability.
There are also further
tax efficiencies available, which can make your retirement more comfortable and
maximize the returns from your retirement savings. For example, by having
pension payments taxed through your local jurisdiction, you can save a
significant amount of tax – even as much as 35% and above!
This all depends on the
tax regulations in your country of origin, and where you plan to live during
your retirement years, so consulting with an expert financial adviser is
essential to get this structure right.
SIPPS vs ROPS
These schemes are some of
the most popular choices for expat
pension transfers – and have lots of benefits to compare!
·
SIPPS stands for Self-Invested Personal Pensions
·
ROPS stands for Recognized Overseas Pension Schemes
A SIPP, in a nutshell, is
where your financial adviser manages your retirement fund on your behalf and
collects a tax rebate against the value of your funds in exchange for putting
certain restrictions on your pension.
These can be tailored to
your requirements and circumstances – for example; you might decide not to
access your pension until you reach a certain age. In the meantime, your fund
is invested according to your risk profile and will continue growing in value
until you would like to start drawing down your pension.
ROPS are a form of
international occupational pension plan, which can accept transfers of funds
from UK pension schemes. This sort of scheme carries significant taxation
benefits; including the potential to draw lump sums and options to save on tax
liabilities by choosing to pay tax at the local rates.
Which scheme is right for
you will depend on your circumstances, your pension schemes, and your plans for
the future – so it is essential to work with a wealth management expert who can
advise on the best solution.
Expert Advice in the Changing Retirement Landscape
Pensions are personal,
and one of the most crucial forms of investment most of us will make in our
lifetimes.
With continually changing
legislation and regulations, it is crucial to consult a financial adviser who
understands the regulatory framework and can evaluate the pros and cons of each
type of pension transfer for you. Particularly when it comes to international
pension schemes, you need to understand the tax rules, what they will mean to
your revenue streams, and whether your plans will make one option more
advantageous than another. For example, if you plan to relocate to another the country during your retirement, or wish to return to your country of origin at
some point, this will be a deciding factor in ensuring you make the most of
your retirement funds.
Chase
Buchanan have established pensions and investment experts, who
structure bespoke retirement plans to ensure every client receives specific
advice about the best way to invest for their retirement. For access to our
extensive expertise, and clear guidance about the different pension transfers –
and what they could mean for your retirement – get in touch today. You can also
request our free Pension Planning guide to
help you navigate the waters of pension transfers and retirement planning with
confidence!
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