Pension advice in Portugal: Six tips for getting it right first time

• 1. Check your pension adviser is regulated by the UK Financial Conduct Authority (FCA)

  Regulated financial companies have to meet certain standards and act in the best interests of their clients. While taking regulated advice is compulsory for people looking to transfer ‘final-salary’ pension benefits worth £30,000+, the FCA strongly recommends it for anyone considering their pension options. A simple online search of a provider’s full name plus ‘FCA’ should reveal more about their relationship with the regulator and link to their record in the Financial Services Register.

• 2. Consider all your options

  Many expatriates benefit from transferring UK pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS). Advantages include more flexibility with withdrawals, such as the option to take Euros or Pounds, and freedom to pass on benefits to heirs other than your spouse. However, a QROPS will not suit everyone and is not always the most tax-efficient solution. With expert planning, pension funds can potentially be restructured in arrangements that provide additional tax benefits for Portuguese residents, so take time to explore alternative options.

• 3. Get personalised, cross-border tax advice

  The Portuguese tax treatment of pensions differs to the UK and can be highly beneficial. For example, if you are not yet resident in Portugal, you could enjoy tax-free pensions through the non-habitual residents (NHR) regime for the first ten years. Outside of NHR, it may be possible to receive 85% of UK pensions tax-free, but the rules are far from straightforward. For some expatriates, it is more beneficial to re-invest UK pension funds into a tax-efficient Portuguese-compliant life assurance bond, for instance, but there is no one-size-fits-all solution.
  UK-based pension advisers are unlikely to have in-depth understanding of the Portuguese tax landscape nor the cross-border expertise required to make the most of the opportunities available. This can result in a much higher tax bill than necessary, so take local, personalised advice for the best results for your unique circumstances and goals.

• 4. Beware of pension scams and unregulated investments

  Be extremely cautious of ‘advice’ from a company that has cold-called you, and never sign anything under pressure. Be especially wary of claims of unusually high or guaranteed returns, and opportunities to access your pension before the age of 55. Generally, if it sounds too good to be true, it probably is, and once you transfer your pension, it is too late. You could end up losing some or even all of your pension funds, and face a large tax bill as well as penalty fees. Make sure you check your provider’s credentials, including their cross-border experience and understanding of Portuguese taxation. Remember: with unregulated companies, there is no recourse if things go wrong.

• 5. Research other peoples’ experience

  Testimonials, particularly word-of-mouth recommendations from people you trust, can provide reassurance and indicate that a business is doing things the right way. Look for consumer reviews, ask around your local community and follow up references where possible. Be mindful, however, that other peoples’ situations might be quite different to yours – what works for them may not necessarily work for you.

• 6. Look at the whole picture

  Pensions should form just part of your overall financial plan. Your adviser should look at your pensions in the context of your unique circumstances and wider situation – including residency, your other assets, tax and estate planning – to help secure the best outcome for you and your family.