Maxim has enlisted the help of The Fry Group to offer advice on pension planning for our Construction professionals.
Working in jobs overseas can free you from the UK’s rules and regulations. Nevertheless, some of the UK’s most complex rules still follow you. One of those areas is pensions, and this already complex area is set to get worse. Our experience has been that many expatriates find it difficult to keep track of any UK based schemes to which they belonged or contributed to before leaving the UK. As a result it can be easy to forget about these frozen pension schemes.
As a means of providing an update on this neglected area, we look at the current crop of changes affecting UK pension schemes and outline the impact on expatriates.
First, some good news. Those investing in UK-based personal pension plans have long argued against having to draw benefits from a set age (currently 75) and having to purchase an annuity. Many feel they are capable of managing their finances so as not to run out of income in old age. The Government has inclined to a different view and insisted that all personal pensions be “annuitized” from age 75. Now, an air of realism can be sensed in the Government’s latest proposals which, if passed into law, will allow personal pension investors the choice of when to draw their pension at any age from 55 and then being free, if they prefer, to defer their benefits to whenever they choose. At that point, a tax free cash sum can still be taken and the balance of the fund can either be left invested or used to purchase an annuity. In short, the constraints are lifted and individuals will be able to choose an option which genuinely suits their circumstances.
For those who are members of a company pension scheme it appears it is business as usual. It has long been possible to transfer a capital sum from a UK defined benefit (DB) Scheme to a personal pension plan. This single area has been the scene of much poor advice in the past and such a transfer could only be recommended in very particular circumstances (e.g. where an individual’s life expectancy was reduced and the scheme provided little death cover or survivor’s pension, or where the scheme itself is poorly funded).
In the second part, we will examine alternatives to company and personal schemes in the UK.