Retirement News & Insights

Being an expat has many potential benefits and opportunities, but residing abroad also brings with it certain complex financial considerations. In many ways these can be made all the more complicated if you also happen to have foreign husband or wife, particularly in regard to your expat pension planning.

Although in most situations having a foreign spouse is unlikely to affect their possible entitlement to your pension in the event of your death, there are many variables that you should consider as an essential part of your expat financial planning.

The Conservative Party has used its annual conference in Birmingham as an opportunity to reassure British citizens living in the EU of the future of their expat pensions.

Speaking at the event Ester McVey, the Secretary of state for the Department for Work & Pensions (DWP) said, "We will ensure that people with UK pensions that have moved to the EU will have their pensions protected.

"We will provide a triple lock on people with UK pensions living in the European Union. We are delivering a private pension revolution, with more people than ever contributing to their pensions."

Following on from last week's blog on pension passporting, written by Rosemary Sheppard, Blacktower IFA in France, The Independent newspaper has now warned that British expats abroad could have their cash flow placed in peril by a no-deal Brexit.

While the talks around Brexit and expat pensions are certainly newsworthy, the reporting of pension payments becoming "illegal", as stated in The Independent's headline, is pretty implausible.

The story, published on July 25 2018, said the Association of British Insurers (ABI) had told parliament's Exiting the European Union select committee of the "plausible" risk that payments from British bank accounts could become unviable.

I recently attended the British Embassy Outreach Meeting in Perigueux and as you can imagine there were a lot of disgruntled expats wanting answers that, frankly, aren’t really available right now.  Understandably, for many living through the turmoil and uncertainty of Brexit, there is a lot to take into consideration and some may even be contemplating moving back to the UK. 

One issue in particular piqued my interest as a gentleman had a letter from his UK pension company informing him that, post-Brexit, they may no longer be able to passport into the EU, which means that they may no longer be able to pay his pension payments directly into his French account.

The UK government has admitted there are not enough pension transfer specialist advisers to deal with demand, particularly in the case of more complex transfers into overseas pensions. This was the government’s response in March to a consultation launched two years ago, on whether the need to take financial advice, introduced with pension freedoms, created difficulties for overseas residents – residents such as those living in Cyprus wishing to transfer their pension savings from the UK to a qualifying recognised overseas pension scheme (QROPS).

According to data from HM Revenue and Customs (HMRC), there were just short of 10,000 transfers to a QROPS in the 2016/2017 tax year. However, from these, only transfers of more than £30,000 would be subject to the advice requirement.

The Pensions Regulator (TPR) has recently acknowledged that pension scammers are being caught out and hindered by action from the government, regulators, the Work and Pensions Committee, and the wider industry, but added that vigilance is still needed.

On 22 May, speaking at the Association of Member-Directed Pension Schemes' conference, TPR's Anthony Raymond said that the plan to ban cold-calling is a welcome step-forward in protecting consumers, and that a recent High Court ruling, which saw four scammers ordered to repay £13.7million they had swindled from 245 victims, sent a clear message to fraudsters.

However, while this court action to regain funds for scam victims is brilliant news, the recommendations for pension savers are clear: stay aware of fraudulent activity and seek independent, regulated pensions advice before signing anything.

The importance of putting money into a pension cannot be understated, and the British government has a regulation in place – the pension tax relief scheme – to encourage people to save. But many experts are predicting significant changes to the scheme. If you're planning to retire overseas as an expat and take advantage of international pension transfers, you'll need to stay updated with these changes.

The pension tax relief scheme is an incentive to entice people to put money into their pension pot. To reward people for thinking ahead to their retirement, the government currently tops up their pension contributions based on the rate at which they pay income tax. So, basic rate taxpayers will receive 20 per cent tax relief (meaning they only need to pay £80 into their pot to get £100), while higher rate taxpayers are entitled to 40 per cent relief.

At the moment it there is only the slimmest possibly of a sudden and dramatic Brexit u-turn, with the consequences of the June 23 2016 referendum set to be formalised on March 31 2019. That's why if you live in Marbella now is the time to ensure that your financial advisers in Marbella are fully attuned to all the issues that might affect you once Brexit becomes final.

Inevitably for many expats this will involve a discussion about their pension arrangements. Yes, expats already settled in the EU should continue to receive yearly inflation-accounting increases to their pensions, but as this is only guaranteed for three years, it is a quite significant caveat.