How Brexit Will Forever Alter UK Expat Pensions
As
2020 continues to spin from one crisis to the next, Brexit seems to have faded
into the background. After all, the UK has already left the European Union, and
nothing seems to have changed dramatically in the interim.
This a false sense of security may cause a big wake-up call come January 2021.
We
are currently in the ‘Transition Period’, which runs up to 31st December 2020.
During this phase, there are no changes to policies or procedures, which means
it might feel like Brexit has fizzled out and disappeared from the front pages
without the anticipated fireworks.
However,
after the end of this year, changes are most assuredly coming. Chase Buchanan
aims to provide guidance and support to ensure you know what those changes are
likely to look like – and what you can do now to secure your financial future.
UK Expat Pensions in Europe – What’s
Changing?
Millions
of British nationals choose to retire abroad, and for a range of reasons.
Better weather, better housing prices, a better quality of life, and better tax
regimes are all appealing options if you’re approaching retirement and are
seeking the ideal way to enjoy your well-deserved golden years.
With
Spain, Portugal, France, and Cyprus among the most popular expat retirement
destinations, Brexit looks set to put a permanent dent in those plans, unless
swift action is taken.
What
is likely to change? Here are some of the most vital considerations:
Pension Transfers: Currently, you have several options for
transferring a UK pension abroad.
These choices depend on the country, and your type of scheme, but there are
appealing options to reduce tax liabilities and avoid currency fluctuation
risks. There is the potential for the UK to introduce a huge 25% Overseas
Transfer Charges to all overseas fund movements – thus taxing a quarter of your
pension fund before you have drawn a single payment.
State Pension Eligibility: As an EU/EEA member country, expats in
Europe continues to receive their UK State Pension, including the annual cost of
living allowance. Countries outside of the EU do not all offer such an option.
It is therefore vital to understand how State Pension eligibility might change
from 2021 onwards.
Uncertainty for New Expats: For those already resident abroad, many
impacts will be minor, such as potentially needing to renew a residency card.
However, for prospective new expats and those approaching retirement, there is
much uncertainty about freedom of movement, pension
transfer options and taxes payable when retiring to Europe.
For
more detail about changes to UK pension schemes for expats in Europe after
Brexit, you can download our FREE Guide: UK Pension Schemes – The Impact of
Brexit.
Preparing for EU Retirement
Post-Transition Period
So,
what actions are available to you? As it happens, rather a few.
Creating
a future-proof strategy now is vital to ensure you don’t fall foul of changing
tax treaties and pension entitlement legislation. Most changes will take effect
from 1st January 2021, so if you have the option of securing residency beforehand,
you might slip into current entitlements, and avoid needing to make any
significant changes to your retirement plans.
Where
new announcements are anticipated, they will also likely have an implementation
period. Therefore, consulting a financial advisor or wealth management expert
now could save a lot of headaches in the future, while there is still
time to consider the options that could improve your status in the future.
The
urgency arises partly due to the scant time left before the Transition Period
ends, and partly because of the timescales involved with making changes to your
pension schemes and retirement assets. For example, pension transfers (such as
transferring a UK private scheme to a Recognised Overseas Pension Scheme, or
ROPS), take several months from start to finish.
By
considering the implications of such a transfer as far in advance as possible,
you have the flexibility to decide to proceed with a transfer – provided your
advisor recommends this as the most advantageous option – with the assurance
that the paperwork and transactions will complete in advance of regulatory
changes.
What Other Retirement Implications
Should EU Expats Consider?
Pensions
are always a headline consideration, given the importance of securing your
investment funds to see you through a comfortable retirement.
However,
it is easy to forget the scale of Brexit, and how this could considerably
change your position with regards to multiple cross-border assets:
Inheritance
and succession taxes.
State
wealth taxes on capital and property.
UK
taxes on British property.
Currency
fluctuation issues.
Overseas
savings and investments.
Double
tax treaties and tax residency status.
Brexit
is an extensive alteration in the way the UK trades with the EU – and it is
crucial to consider each and every asset, account, investment, and fund to
determine how Britain’s departure might impact that. For example, assets
currently taxed on beneficial rates as an EU member state may suddenly become
subject to non-EU rates and restrictions.
Double
tax treaties may change, be removed, or require separate applications and
treatment to avoid paying duplicate taxes in both your home and host countries.
Properties owned overseas might be taxed at source, or be taxed according to
local tax regimes, depending on your tax residency status, level of income, and
the type of property owned.
The fundamental point here is that, while Brexit may bring about far-flung changes,
being prepared means avoiding any short, sharp shocks, and having the assurance
that your assets are held in the most stable, safe, and secure vehicles
possible.
Expert Support for UK Retirement
Planning
The
Chase Buchanan team is committed to providing the highest-quality professional
financial support for UK expats who are planning to retire abroad or are currently
resident in an EU country.
Whether
you are concerned about the solidity of your retirement plans, would like
support with structuring investments and assets in alignment with your
aspirations, or need to protect your pension fund in advance of Brexit, our
teams are on hand to help.
Our
FREE Guide: UK Pension Schemes – The Impact of Brexit explains all of the
potential changes and a short-list of the most beneficial actions available to
smooth your way through the end of the Transition Period. Download your free
guide today, or contact the Chase Buchanan team for bespoke advice and tailored
recommendations to secure your retirement in Europe.
web url: - https://chasebuchanan.com/uk-expat-pensions/
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