Partner Article

Pensions, Brexit, Emigration – a tumultuous 2017

As the political situation regarding Britain’s role in Europe slowly becomes clearer, those in business are considering the wide variety of possible impacts on their business, from currency rates to regulation, customs charges and recruiting skilled staff from wherever they may be.

For those mobile go-getters who would consider moving abroad to live, work or retire, research after the summer referendum showed that Brexit didn’t just mean the UK’s Brexit: it may also mean exit – from the UK for businesspeople, from their businesses.

A poll of 250 Britons seriously considering emigration showed a fifth cited the EU referendum vote as the main reason why they wanted to emigrate. There are certainly plenty of people who feel that Brexit will affect their business or personal prospects. For those similarly minded, it should be pointed out that it might be harder to move abroad than at first thought.

Perhaps predictably, the research uncovered that sorting out their UK pension is bottom of the list when it comes to pre-emigration tasks for those looking to leave the UK. Failing to take the appropriate advice in time could well leave many out of pocket when it comes to collecting their full financial entitlements.

And for those considering transferring their UK pensions overseas, a Qualified Recognised Overseas Pension Scheme (QROPS) is an option. One reason to consider QROPS is that whilst there is a £1 million maximum limit for the tax year 2016/17 on lifetime pension savings (known as the lifetime Allowance) aggregated for all the UK pension funds someone holds, the lifetime allowance does not apply to funds accumulating within a QROPS.

A pension or pensions grouped together must be within the lifetime allowance before transferring offshore to avoid tax charges. But providing the individuals total aggregated UK pension fund does not exceed that £1 million (or potentially more if the member has registered for protection there will not be a tax penalty.

And as of now, pensioners receiving their pension income in pounds sterling and converting to other currencies are suffering from the exchange. This is because, by moving abroad, a UK pension member’s new lifestyle will be in a different currency to that of their UK pension funds. This could make a huge difference in retirement where exchange rate fluctuations lead to uncertainty of income levels in retirement.

According to our research into migrators and their pensions, less than half (43 per cent) seriously considering a permanent move abroad said it was important to arrange their pension transfer before emigrating. It’s understandable, of course: in all the excitement of planning a move abroad, there are a thousand and one other considerations, from finding a place to live (cited as “important” by 81 per cent of respondents), to arranging visas (78 per cent), to sorting out medical cover (61 per cent).

But pensions are everyone’s lifeline and only 13 per cent of our respondents said their existing pension would only make up a “minor” part of their retirement income, so it’s not something we should be complacent about. Unless you’re certain that you’re intimately acquainted with the rules surrounding pensions, speaking to professional retirement planners and IFAs could be the wisest financial decision you’ll take in your life.

By Paul Davies, Director, bdhSterling, specialist provider of cross border financial advice and investment solutions.

This was posted in Bdaily's Members' News section by bdhSterling .