What UK expats should know of pension planning

UK expatriates should consider their options on pension planning carefully after recent changes governing access to funds in their home country, according to financial advisor Nexus Group.

In April 2015, new legislation gave many people holding UK pensions more freedom, with the option to take cash out in lump sums for those aged 55 or over and to defer taking a pension from those plans.

With an estimated 100,000-plus Britons now living in the UAE, the country has risen to third among British expats for most desirable place to live, according to the NatWest International Personal Banking Quality of Life Report, from 10th in 2011.

While many UK expats may now accordingly be considering transferring funds from their home country to offshore savings schemes, this may prove to be an extremely costly mistake.

“It is crucial that individuals are not rushed into making decisions that may not be in their best interest. There are a number of key questions to be answered before making a decision on pension funds,” said Darren Lyons, Executive Consultant, Nexus Group. 

“UK expatriates need to consider their circumstances before choosing to move their pension plan, including such factors as how long they intend to be out of the UK for, any future location they are planning to work or retire in, and the flexibility they need in how they can access benefits.” 

There are a number of flexible schemes available both in the UK and offshore that offer cost effective solutions, so expats should look carefully at what is available to meet their requirements.

Crucially, before a UK expatriate makes a decision on their pension, they need to ensure their financial advisor has sound knowledge of UK pension and tax legislation, as offshore saving schemes are very different to UK pension plans and advice should be tailored accordingly.

For instance, clients should look at a solution that is flexible to their needs and offers the most tax-efficient benefits – not something an advisor without knowledge of markets outside the UAE may necessarily be able to help on.

Other areas where flexibility is important include the ability to invest in a diverse range of funds, and for the scheme be able to accommodate a transfer from one location to another.

What is important is for people to ensure that they start their savings plan in good time: with a recent survey by Bayt.com and YouGov showing 27 per cent of respondents save nothing from their monthly salary, too many expatriates aren’t making provision for the future.

(Image via Shutterstock)

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