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Regular savings or not, your pension planning matters

Both types of pension scheme certainly have their respective disadvantages. For example, if a person dies under the terms of a final salary scheme the surviving spouse is entitled to only 50% of the pension, while children or other dependents receive nothing, even in the event that the surviving spouse also dies. This is hardly an ideal situation and does seem more than a little unfair, particularly given that final salary schemes are also inflexible and, furthermore, void if the company goes out of business – former employees of now defunct companies such as Woolworths can stand testament to the painful impact of these shortcomings.

On the other hand, in cases where the saver dies before turning 75, defined contribution schemes pass to beneficiaries tax-free. Furthermore, funds held under these schemes become available to savers when they reach 55 and can largely be used when and how the saver chooses. Although this might not sound drawback-free, the reality is that some savers have been shocked to learn that they must pay huge income tax on withdrawals from the fund – again, hardly an ideal situation for most.

Expats

The situation for expats is interesting. This is because they are eligible to transfer their pension funds to a Qualified Recognised Overseas Pension Scheme (QROPS).

Although QROPS have official status with HMRC, they provide an attractive level of flexibility and are very favourable from a taxation perspective.

For example, they can be converted into income with only minimal tax liability, qualify for tax-free lump-sum withdrawals of up to 30% of the fund value and can pass on to spouses, children and other beneficiaries tax-free. There is little doubt that a QROPS transfer represents a sound choice for qualifying British expats, whatever the level of their regular savings.

Other News

HMRC Pension Transfer Guidance May Change

CogsThe rules relating to pension transfers and inheritance tax could be set to change after HM Revenue & Customs (HMRC) announced that it is to review its guidance on the matter following a number of concerns raised by the Office of Tax Simplification (OTS) in a review published on July 5 2019.

One area that the OTS has earmarked for examination involves the rules relating to pension transfers made within two years of a person’s death. Such transfers can result in the deceased person’s remaining defined contribution pot being subject to 40 per cent inheritance tax unless the estate can prove to HMRC that the pension transfer was made without the intention to deliver gratuitous benefit.

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Consolidate your Irish pension

Sunset over rocks on a beachOne of the best pieces of semi-financial advice I ever received was about buying clothes: buy good quality (obviously) and then have the garment altered to fit me specifically; sound financial and sartorial sense. Of course, this means going a little further than one might normally when buying a new outfit, but it’s a little extra that I think is more than justified in the end. Ready-to-wear clothes are great without doubt, but having something that fits you perfectly gives a continued feeling of satisfaction with every wear, it’s so worth it. There are parallels to be made in my professional life as well; it’s such a pleasure to be able to offer clients advice and products that are tailormade to their requirements and fit their circumstances perfectly.

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