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Expatriate Pension Planning

Could you afford to retire today?

If you answered “Yes” to the above question then we congratulate you - you have either worked and saved hard, invested intelligently or been very fortunate to have received financial assistance. If you answered “No” you should seriously review your circumstances and continue reading.

Ensuring that your retirement will be financially comfortable requires both an income goal and a strategy to achieve it.

Far too often many people believe retirement is a far away destination and that planning for that time can be postponed until ’tomorrow”. This is especially true for younger clients and those starting out in new careers.

The sad truth however is that with each passing month, the ability to reach any given retirement income goal becomes increasingly more costly, pension goals will require a higher funding level for the remainder of your working life if postponed.

Don't let a lack of income in retirement be a financial headache


Recent surveys now document that retired “Baby Boomers” (individuals born in the years following the Second World War) are suffering bankruptcies in skyrocketing numbers. Although complex, these reports illustrate the simple fact that retirees do not have sufficient funds or income available.

Life longevity

If the elderly bankruptcy numbers were not sufficient evidence to illustrate the looming pension income problems for those in their twenty's, thirties, forties and even fifties we also learn that the vast majority of us are now living longer.

This chart illustrates the probability of living to a specific age or beyond if you are currently aged 65.

The disappearing workforce


How many pay days do you have left?

All too often we get wrapped up in our busy work and private lives and forget to realise how quickly time passes by. The number working days become less and less as we move forward, moving ever closer to our days in retirement.

Planning pension income has never been more important.

When looked at in this context you will come to understand that early planning action is essential if creating a liveable income when your working life comes to an end is important to you.

  • Expat Pension Plan FAQ's
    • What is an expat pension plan?

      The term - expat pension - as referenced by many offshore life assurance and investment companies, is something of a misnomer.

      The term is often used to create the illusion in the expat mind that a pension fund is being created in a similar fashion to those that exist in the UK or USA.

      In essence the expat pension plan is simply an offshore savings plan designed to create a fund that can be used in retirement.

      There are distinct differences between an expat pension plan and the UK and US counterparts.

      The primary difference is that expat pension plan contributions do not qualify for Government tax relief incentives as they do in the UK and US.

      The expat pension plan will however benefit from tax free growth (other than the usual small withholding taxes applied to certain investments) in a similar way to the onshore variants.

      At the time of claiming benefits an expat pension plan can, as it is not controlled by HMRC pension rules and regulations, be fully encashed and importantly tax free dependent upon your residency status at the time of encashment.

      UK & US pension fund encashments will normally incur some taxation penalty after a limited tax-free allowance has been used up.

    • How will Brexit affect expat pension plans?

      Many British expats are concerned about the UK’s decision to leave the EU and how it will affect their pensions.

      Changes, if and when they occur, will not be sudden nor occur overnight. Statutory rights will remain in place until the UK is officially no longer an EU member state, a process that may take two years or more. It could ultimately be that nothing materially changes after the final exit other than the impact of exchange rate movements that impact the value of the pound.

      State pensions are a separate subject - read below.

    • How could Brexit affect your state pension?

      UK residents receive annual inflationary increases to their state pension benefits. Expats living in the EU are protected by EU law and continue to receive these annual increases, but those resident in countries such as Australia, New Zealand and Canada and many other countries do not.

      To be entitled to the annual increase you need to be resident in an EU or European Economic Area (EEA) country, Switzerland, or a country with which the UK has a social security agreement which includes a clause entitling recipients to an annual increase.

      The UK does not currently have any bilateral agreements in place with EU countries, other than at a general EU level, so what will happen after Brexit? Looking at the past as a guide there appears to be some good news.

      The legal framework and administrative processes already in place give the state pension annual increase to retirees living in an EU country.

      The UK has also proved willing to adopt a positive approach to the entitlement of increases in times of change (the breaking up of Yugoslavia being a case in point).

      If however the government was under pressure to raise money following Brexit, it could potentially take steps to prevent those not contributing to the UK economy from receiving benefits such as the annual rise in the state pension.

      Only time will tell, but comfort can be taken by the fact that recent history, coupled with the framework already in place, suggests that the annual increase may well continue for those living in EU countries.

    • How could Brexit affect your registered pension scheme?

      Based on current law and practice, Brexit will have no impact on your pension schemes.

      The UK pension freedom is solely a matter of UK law and so whether the UK is an EU member state or not is irrelevant.

      Overseas pensions, as a generic subject area, are not discriminated against under the general law of Cyprus, France, Malta, Portugal or Spain.

      This will not change with Brexit. The taxation of benefits should not be affected either. It is the double tax treaty between two countries that determines taxation where the benefit arises in one country and the recipient is tax resident in another. These are individual agreements between the UK and each country and are not impacted by whether the UK is a member of the EU.

      This is opportune time to review the underlying investments that constitute your pension fund.

      Many UK pensions funds are predominately exposed to UK investment assets, with the period of uncertainty ahead for the UK you may feel it prudent to have wider diversification in your funds and with an investment strategy closely aligned to your personal risk appetite.

    • What will happen to State pensions for UK expats post Brexit?

      The government has confirmed it will continue to inflation-proof the state pension for hundreds of thousands of expats who retired to the EU for a year post-Brexit.

      There has been a cloud over arrangements for state pension increases for UK citizens who have retired abroad, with the annual increase to their pension ensuring that the payments do not lose their spending power.

      The state pension is currently uprated each year by the higher of either wage growth, inflation or 2.5 per cent.

      Lord Jones of Cheltenham had asked the government whether UK citizens planning to retire to Italy would continue to receive the annual increase in their state pensions if the UK left the EU with no deal.

      In her response, Baroness Buscombe, undersecretary of state with the department for work and pensions, said the UK State pension would continue to be payable worldwide following the UK’s department from the UK.

      As the government set out in its policy paper - Citizens’ Rights — EU citizens in the UK and UK nationals in the EU - we want to secure continued reciprocal arrangements covering the uprating of State Pensions in the EU even in the event of a no deal exit said Baroness Buscombe.

      We will uprate the UK state pension for those living in the EU in 2019-20.

    • Are expat pension plans tax efficient?

      Yes - although you will not receive Governmental tax relief on pension premiums you will receive tax free growth (albeit some small occasional withholding tax applies with some investments) and dependent on your residential status can receive tax free cash withdrawals at maturity

    • How much do I need to contribute to an offshore expat pension?

      Statistics tell us that the vast majority of savers do not save enough.

      Remember that the more you save early on the more chance those monies have of accumulating the most.

      Saving should be a high priority and not an after-thought.

    • What funds and investments can I include in an expat pension?

      We generally recommend discretionary fund manager funds that are closely aligned to your specific risk profile. By using such funds you can rest assured that your investments are been handled and monitored by teams of experienced analysts and portfolio managers on a daily basis.

    • What is the minimum age you can take benefits from an expat pension?

      Unlike onshore pension plans that dictate a minimum age of 55 for withdrawals an expat pension plan can be drawn upon at any age.

    • Can you take cash from an expat pension?

      Absolutely - expat pension plans have no restrictions on timing or amount of withdrawals

    • How much tax free cash can I take from an expat pension?

      100% of the fund can be withdrawn from an expat pension plan

    • Do I have to purchase an annuity with an expat pension?

      No - annuities no longer have to be purchased with proceeds from an expat pension plan although in some circumstances an annuity purchase case may be beneficial.

    • How do I set up an expat pension?

      In the first instance contact us at [email protected]

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