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Pension Planning tax free benefits

Taking Cash Benefits

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Can you access your pension tax-free? We publish simple information below to allow you to decide

Bang! April 2015 has led to the starting gun being fired on people accessing their pension funds to pay off debts, buy new assets or just invest elsewhere. Many of these people have done that without realising the tax implications, and already some are coming to us asking us if the decision can be reversed!
Also, widespread use of certain QROPS territories such as Malta, hide the fact that some countries (For example Switzerland) offer a fantastic opportunity.

Understanding the rules means you don't have to break them:

  • If you live in certain countries, especially in Europe, then you could benefit from tax efficient access in excess of anything available from either a SIPP in the UK or QROPS in Malta.
  • However, it is also key to understand that if you have multiple small pensions cumulatively less than £30,000 then you commute them all to cash in the UK, without advice, but you will be liable to income tax on 75% of that obtained.(see next points)
  • The income tax will be that in the UK, or it will be according to the Double Tax Treaty (DTT) of the country that you live in.
  • If possible, a better solution is accessing a fund of £28,000 or less split over 2 UK tax years; allowing for UK personal allowance will almost certainly result in minimal tax or no-tax being paid (to be clear, take up to £14,000 per annum).
  • There is no advantage, due to the high costs, of anyone utilising a QROPS to access funds of £30,000 or less, other than in exceptional circumstances.
  • Often, advisers overseas utilising a QROPS for small funds is not for the clients benefit, but purely for commission and earnings reasons for the adviser.
  • If you have multiple small pensions less than £30,000 then you may be able to commute them all to cash, prior to 6 April 2015.
  • For larger funds, most people will have the option of commuting all their pension funds up to 100% (Only 25% of this will be UK tax-free and the remainder will be taxed according to the DTT of the country you live in. CLICK HERE for further info about DTT.
  • Again, prudent use of encashment in different tax years could result in very low or no-tax being paid utilising the new UFPLS regime in the UK.
  • Death taxes removed for everybody under 75 - no 45%, nor 55% tax, for Beneficiaries.
  • SIPP will give the option to choose various low cost structures, that can be utilised post death as well.

Conclusion

Receive small pensions with zero tax deducted from the UK either through the use of UK personal tax allowances, or through use of DTT’s or a combination of the two. Even larger pensions can have careful financial planning to ensure minimisation of tax. We do not recommend anyone even considers a QROPS until their funds are at least £150,000 other than jn exceptional circumstances, or unless they live in a country that has specific QROPS dispensation for its own residents (for example, New Zealand, Switzerland or Australia). CLICK HERE for further info about DTT

AVOID HUGE COMMISSIONS: We will conduct business at minimal cost to you:

If you do not require advice, or if you have received advice and want to save money then we are able to conduct your business at minimal cost to yourself, and with no hidden commissions.

Typical points or questions for taking funds from pensions after April 2015:

  • I have UK pensions ( excluding state pensions) worth less than £30k; or Yes
  • I have UK pensions ( excluding state pensions) less than £150,000 and am happy to plan for the minimisation of tax over a few years using the new UFPLS regime Yes
  • I understand I may live anywhere (including the UK) Yes
  • I am over the age of 55 and need adviceYes
  • I have already purchased an annuity with my money? No
  • I have taken my PCLS, or am drawing on income from my fund? Yes
  • My company/occupational pension is already in drawdown? No
  • I am still a UK resident and have no intention of moving overseas? Yes
  • I am overseas, so can I still benefit? Yes
  • I do not live in France, Australia, USA, Switzerland (list not comprehensive) Yes

The last point is merely a guideline of some countries where there are other options to be considered that may be better, or there may be double tax implications which need to be taken into account.

Why pay tax that you do not have to? – and increase your flexibility for taking tax free cash

Depending on your status, along with future living plans, we can answer your queries and provide qualified and expert advice, without any further obligation from you. The key here is that one size does not fit all. However, anyone with a UK pension scheme who now lives overseas as an expatriate, or is planning to leave the UK, can now receive advice from UK experts that will avoid them breaking the law and have the UK HMRC pursuing them for tax penalties of 55% or more.

Should I consider a QROPS to utilise tax free cash?

Depending on the jurisdiction chosen for the Pension Scheme, there is the potential for greater tax free cash from a QROPS and this should be considered for people who live in certain countries like New Zealand or Switzerland (not a comprehensive list, just examples). People with large funds in excess of £600,000 can also consider QROPS as an alternative irrespective of which country they live in. Contact us for advice.

Apply using the form top right and download our FREE guides.

Case study

  • Uk based client who was moving overseas had heard he could obtain 100% "tax free".
  • Actually, what he was being recommended was going to cost him 9% and make him potentially liable to a tax penalty of 55%.
  • He was already in receipt of pension income in the UK in excess of £12,000. So we applied to release all of his remaining funds to him.
  • To avoid UK income tax legally, we instructed him to do the "release" the day after he had left the UK. He obtained £82,000 (after tax overseas) using this money for his personal use.
  • He also asked us to invest £25,000 which he is hoping to use as an emergency access fund in the future.

How we can help you

  • Would you prefer UK qualified experts to provide competent advice, rather than an offshore salesman seeking commission?
  • Are you no longer resident in the UK or considering moving abroad?
  • Do you have more than £50k in your UK pensions?
  • Would you like to pay less tax and have greater investment freedom?
  • If you answered YES to these questions Pensions4Expats could greatly improve your financial and tax situation.

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