UK government admits Brexit may affect tax-free pension transfers
We are often asked what will happen to UK pension rules for expatriates after Brexit and the reality is that no-one knows for certain – including the British government.
Reassuringly, last month the UK’s minister for pensions and financial inclusion, Guy Opperman, confirmed that expatriates will keep the right to make pension transfers within the EU, whatever happens with Brexit. However, another government figure has admitted that the tax treatment of overseas transfers could potentially change.
The current situation
Today, EU residents are not taxed when transferring UK pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS) located in an EU/EEA (European Economic Area) country, such as Malta or Gibraltar.
But transfers outside of the bloc have been subject to a 25% UK ‘overseas tax charge’ since March 2017 (unless you live in the same jurisdiction as the QROPS).
On leaving the EU, the UK loses its obligation to maintain freedom of movement for capital, offering more scope for the Treasury to recoup revenue from UK nationals living in Europe. As such, many spectators expect the overseas tax charge could extend to capture transfers within the EU/EEA post-Brexit.
According to economic secretary to the Treasury, John Glen, “whether or not these transfers will be exempt… once the UK leaves the EU is dependent upon the terms of future exit agreement between the UK Government and the EU.”
In any event, nothing is set to change until at least the Brexit due date of 29 March 2019. But without a guarantee that tax-free transfers will continue beyond then, it is sensible for anyone considering transferring to act sooner rather than later – especially as the process for pension transfers can take several months to complete.
Transferring to a QROPS can consolidate several UK pensions under one tax-efficient roof, sheltering funds from UK taxation and future changes to pension rules. QROPS usually provide greater investment diversification, estate planning flexibility and more freedom to vary income compared to UK pension schemes.
And, while UK pension payments are usually made in sterling – and therefore sensitive to volatile exchange rates during Brexit uncertainty – many QROPS offer multi-currency flexibility to hold and draw your funds in your currency of choice.
Funds transferred to a QROPS will also avoid the risk of a no-deal Brexit ‘cliff-edge’, in which some UK personal pension providers could lose the legal right to pay benefits to expatriates.
However, transferring is not appropriate for everyone and differences between QROPS providers and jurisdictions could affect the tax benefits. Alternative investment structures could offer expatriates comparable benefits to QROPS, so take personalised, regulated advice to establish the most suitable approach for you.
Even if transferring is not right for you, with so much uncertainty ahead, now is the time to review your pension arrangements so you can secure the retirement of your choice in your country of residency, whatever Brexit brings.
Our thanks to Blevins Franks for allowing us to share this article which first appeared on their site 26/10/18 – original article here
Summarised tax information is based upon Blevins Franks understanding of current laws and practices which may change. Individuals should seek personalised advice.
Blevins Franks Financial Management Limited (BFFM) is authorised and regulated by the Financial Conduct Authority in the UK, reference number 179731. Where advice is provided outside the UK, via the Insurance Mediation Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of the UK. Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of trusts and companies. Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z. Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Tax Limited provides taxation advice; its advisers are fully qualified tax specialists. This promotion has been approved and issued by BFFM.
Become a Member of The Alliance today for FREE and be the first to know about new content, offers and savings (oh and we're also offering a 12-month Luxury Restaurant Club card to founder members...)
Found this article useful? Please share using the social buttons below
Looking to secure a good currency transfer rate?
The Alliance of International Property Owners is pleased to be working with Clear Currency, our official foreign exchange partner.
If you can find a better price, elsewhere at the time of your transaction, Clear Currency will beat it.