Choosing an expat pension scheme is a crucial decision if you want to ensure a comfortable retirement. In the UK, there are several schemes with similar features that compete with one another. Each plan can meet money-management issues depending on where the pensioner lives, retirement goals, and age when they applied for the scheme.
In general, there is a set of legislation and regulations that govern these schemes. However, there may be some slight differences, especially when it comes to tax relief. If you seek advice from Pensions for Expats, there is no pension product considered better than the other. Instead, you’ll need to look through the options by taking into account your financial goals.
Qualifying Recognised Overseas Pension Scheme
This type of scheme is applicable if you’re a UK expat, or a foreign worker with a UK pension. Any expat working or living within the European Economic Area can invest in a QROPS while based in another EEA country. If you’re outside the EEA, you can still invest in QROPS, provided that you live in the same country as the QROPS scheme you applied for. It’s critical to note that the availability and regulations surrounding QROPS may change due to Brexit.
When it comes to transferring funds, you can move money out of a private pension fund to a QROPS but may not be able to if the source is a state-funded pension plan. The good thing about QROPS is that you won’t pay capital gains tax on your earnings.
Qualifying Non-UK Pension Scheme
This type of pension scheme is suited for older expats saving and planning for their retirement. This is also another type of offshore pension scheme that’s available worldwide. You can’t set up a QNUPS in the UK but will be able to save into the plan while living or working abroad. Another benefit of QNUPS is that wherever you are in the world, you can have a pension plan based there, making it portable.
If you have an existing UK pension fund and would like to transfer money into a QNUPS account based overseas, be prepared to pay a transfer fee. The good thing is, you also won’t need to pay capital gains tax.
Self-Invested Personal Pensions
This type of pension scheme is available worldwide and is another excellent option for expats. With this scheme, you have the choice to have it registered in one country while you’re working or living in another. Since the plan is portable, you don’t need to worry about the impact of changing your residence on charges and taxes. If you have a pension in the UK, you can still register for a SIPP and transfer your pension funds. However, transferring only works for private pensions and not for state-funded accounts.
If you’re eligible for any of these three options, the best way to determine the right scheme for your needs is to contact a financial advisor. Remember that managing funds offshore will have other implications, and knowing regulatory requirements is critical to stay compliant.