Have you initiated a retirement savings account in the UK and now you are planning to move to another country? Or maybe you previously work in the UK and your company has supported you in a pension scheme, and now you are confused about how to collect the funds? If that is the case for you, you shouldn’t worry about the UK pension transfer, as you have the option to still save the pension funds in the UK and still earn profit from it. However, you can also relocate your savings abroad and benefit from it. Whatever the choice you will pick, it is in your best interest to be aware of the potential perks of each option and understand how it works.
Many workers consider moving their pension overseas because they want to easily calculate their income and spend it in the same currency of the country where they will retire. It will also help them keep up with the valid regulation in the country where they reside. They won’t be subjected to two countries’ regulations on pension schemes. Although it seems like offering simplicity, it is practically not as easy as it seems. You should take a look at numerous restrictions and guidelines between the two countries (the UK and your destination) and follow them. Therefore, it is recommended to consult with a financial adviser to get a clearer insight before you make a decision.
It is not obligated to relocate your UK pension pot when you leave the country. In fact, you are still allowed to keep it in the UK and it won’t stop you from reaping its benefits. If you are worried about currency conversion, you can overcome this issue by creating a foreign exchange account, so you can move the needed sum of your pension and automatically exchange them into your home currency. It is highly important to know the new plan, its difference with your UK pension, and the fees and tax regulation associated with the transfer. You may have to move your funds to a Qualifying Recognised Overseas Pension Scheme or QROPS pension transfer, as it meets the requirements with HMRC standards for obtaining transfers from UK-registered pension plans.
By using QROPS, you might not be charged any tax when you transfer your funds if you meet these requirements:
- A citizen of the state where you are switching to QROPS.
- A citizen of a European Economic Area (EEA) states, and your destination country is also a member of the EEA states or Gibraltar.
- Your employer sponsors your QROPS.
However, you may be required to pay a 25% tax if you don’t meet those terms and conditions above. Therefore, it is essential to check and confirm whether your pension funds will be applicable to tax-free regulation if you transfer it to QROPS, as it can help you save more balance on your account.
It is not recommended to move your retirement savings to a pension pot that is not QROPS, as it could lead you to pay a 55% non-authorized tax and other additional penalties. You may also put your pension at risk, end up losing a large amount of your savings, and pay a big amount of tax charges.
