Expatriate Pension Planning – pt 2
In the first part of Maxim Recruitment’s look at overseas pension planning, we looked at some of the issues facing British workers in jobs in foreign territories. This time, we look at alternatives to the UK based company and personal schemes.
Many expatriates have considered transferring to a QROPS (Qualifying Recognised Overseas Pensions Scheme) as an alternative to both company and personal schemes in the UK. QROPS offer various benefits including:
· Removal from the UK tax regime
· Freedom of investment choice
· Not having to purchase an annuity
The second change concerns Government proposals and their possible effects on UK-based DB Schemes.
For many years, DB schemes have been able to ‘contract out’ of the Government State Earnings Related Pension top up scheme (SERPS). Many have taken advantage of this, but there is a concern that the ‘contracted out’ schemes will not provide an equal benefit to SERPS. The proposal is that it will no longer be possible to transfer benefits from a ‘contracted out’ DB scheme to a ‘contracted out’ personal plan.
Why might you want to do that? For now at least, benefits from a DB Scheme are inflexible. You must take a lump sum and income from a particular age and, as a result there is no ‘pot’ to leave to survivors (although the scheme might provide a widow/er’s pension).
An alternative has always been to transfer from the employer’s to a personal scheme and, as noted previously, those latter schemes offer greater investment freedom and the ability for any unused capital to be passed to survivors. However, should Government proposals become law any benefits could become trapped in your DB Scheme.
In general, when taking an overseas construction job it’s always worth speaking to your new human resources department as well as your pensions advisor in order to get as much expert advice as possible on how to managed your situation.