Gauging the pension options open to returning ex-pats
London & Colonial's Adam Wrench assesses the options open to returning ex-pats...
There have been a variety of stories on the growing number of ex-pats returning to the UK recently. Whether this is down to disenchantment, homesickness, redundancy, or any number of other reasons, is anybody's guess.
What doesn't take any guesswork, however, is that each and every one will need specialist advice, to ensure their assets are assessed and effective guidance is provided prior to any planned return back home.
A detailed fact find is, as ever, the essential starting point.
Assuming a client has a QROPS (Qualifying Registered Overseas Pension Scheme), it is important to establish upfront whether they have been a non-UK resident for more than five full tax years. If so, they should be eligible to transfer the funds within their QROPS into a QNUPS (Qualifying Non-UK Pension Scheme).
If the QROPS is already denominated in sterling, then the repatriation of the funds is greatly simplified. However, should it be denominated in another currency, then exchange rate fluctuations will come into play.
The new rules on pensions ‘cashing out', which come into force in April 2015, provide another option to consider.
Depending upon their circumstances, they may also wish to continue with their current contributions, or perhaps make new contributions to bolster their existing fund.
However, there is a good argument to be made for doing nothing, as there are no legislative requirements to transfer funds back to the UK. In fact, leaving a QROPS intact has many advantages. Not only are there no transfer, set up or other fees involved, but any fund growth would fall outside of future lifetime allowance tests, and only 90% of any pension income would be assessed for UK tax purposes.
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