For example, whether your spouse inherits all, part or none of your private pension will hinge on the nature of the pension fund of which you are a member. As a general rule, the most common types of pension scheme operate in the following way:
- Defined contribution schemes: the ability for you to pass on a defined contribution pension will depend on how you invested it. For example, if you die before you reach 75 and have it invested in a drawdown scheme, the fund could be inherited by your spouse tax-free if you have nominated it to be received in this way.
- Defined benefit schemes: in most cases these pension schemes should allow your foreign spouse to receive your entitlement on your behalf – whether as a lump sum or regular payment. However, there are no guarantees in this regard, so you should check with your wealth manager to ensure that everything is in order.
- Annuities: annuities often seem like a great idea in principle and sometimes they can be – after all they represent a guaranteed income for life. However, annuities are not actually a type of pension but are essentially a type of insurance policy you might decide to purchase with your retirement savings. Whether you are able to pass on an annuity to your spouse will depend on specific terms and conditions.
- SIPPs: A self-invested personal pension fund can be passed on to nominated beneficiaries on your death, including foreign spouses, who then have the freedom to take the fund as a lump sum, as income or as an annuity. In other cases, your spouse might decide to leave it invested in the fund. Furthermore, if your spouse does not exhaust the fund before their death, they can pass it on again to their chosen recipients.
- QROPS: A Qualifying Recognised Overseas Pension Scheme should allow you to pass on the full value of your pension fund to your foreign spouse on death if you die after you reach 75.
The above are purely guidelines and you should always seek advice about your particular chosen scheme either through the provider or by way of your international financial adviser, who will be able to ensure your plans for the future of your retirement savings are structured to suit your specific circumstances and wishes.
Blacktower, for Expat Pension Planning
As a leading wealth management firm with offices across Europe and the globe, Blacktower can help you with all aspects of your finances, including expat pension and financial planning such as SIPPs and QROPS. If you would like help planning your pension and shoring up your inheritance planning, speak to us sooner rather than later to ensure that everything is in order.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
At the moment, politicians across the world – especially, it seems, in the UK – are in the spotlight regarding their tax affairs. Banks, however, will also soon be in the spotlight, as by Friday 15th April they have been told to hand any information regarding their dealings with the law firm at the centre of the Panama Papers over to the UK’s Financial Conduct Authority.
The pensions tax relief Lifetime Allowance (LTA), otherwise known as the pension lifetime limit, should be an area of active concern for any expat with a high-value pension.