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Your Foreign Spouse and Your Pension

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.

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The EU Referendum


FRIDAY 24 JUNE 2016: The British electorate has given its verdict on the UK’s membership of the European Union in no uncertain terms. In spite of the more emotional appeals to the contrary, this is not a disaster. On this extraordinary day, it is worth remembering that on the 20 February 2016, when David Cameron announced that the EU referendum would take place, the FTSE 100 index was at 5950, the 10 year Gilt yield stood at 1.41% and the sterling/dollar exchange rate was 1.44. At lunchtime on Friday June 24 the FTSE 100 is trading at 6060, the 10 year gilt yield is 1.07% and the dollar exchange rate is 1.37. On the face of these numbers you could be forgiven for not knowing what has taken place in the past 24 hours.

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Final salary pensions – why now is a good time to cash in

Juicy lottery-sized sums are being offered to savers to tempt them out of gold-plated workplace pension schemes and into personal plans. We’ve explored whether you should consider taking a final salary pension, as well as the benefits and drawbacks of withdrawing.

What is a final salary pension?

A final salary pension, sometimes referred to as a gold-plated pension, is a special style of retirement fund that is based on your final or average salary.

The main difference between this and a defined contribution pension is that a final salary scheme gives you a guaranteed sum annually for the rest of your life when you retire.

To work out the value of your final salary scheme, consider a few factors: 

  1. Your final or average salary at your place of employment (confirm this with your employer)
  2. Your length of service
  3. The final salary scheme’s accrual rate (this is often 1/80th)

Your final salary pension will take each factor into account, and the resulting figure will be the guaranteed annual sum you are entitled to.

For instance, if you worked somewhere for ten years, and leave on a salary of £100,000, with an accrual rate of 1/80th, you will have a guaranteed retired annual income of £12,500.

It is possible to undertake a final salary pension transfer. Depending upon how long you expect to enjoy retirement, this could be a favourable choice. However, it’s important to consult a financial advisor to make your final salary pension transfer values work harder.

What are the benefits of transferring a final salary pension?

Assessing your final salary pension transfer value, you might consider it worthwhile to withdraw. We’ve outlined the main benefits of taking your final salary pension:

Receive the cash value of your final salary pension

Withdrawing from a final salary scheme allows you to receive a cash lump sum in return for forfeiting your guaranteed income in retirement. This final salary pension transfer value is the main reason to withdraw from a scheme, as it offers you financial freedom.

Remove ties with your employer

This is an especially important point if you’re concerned that your employer may not exist throughout your full retirement. For most, the pension protection fund (PPF) will cover your pension, but, for especially high earners, there is a PPF ceiling of £41,461 (as of April 2020).

Enjoy a flexible income in your retirement

A final salary scheme entitles you to a guaranteed annual income when you retire, but if you go down the route of transferring your final salary pension you will be able to enjoy a little more flexibility in how you receive your income. Usefully, by withdrawing from your final salary scheme, you can choose to take more out in your younger years.

Choose how you want to invest your pension

A final salary scheme is controlled tightly to accommodate all employees and their interests. When withdrawing from the scheme, however, you can take complete control over how your pension fund is invested.

The considerations you should make before transferring your final salary pension

While there are certainly benefits of going down the route of transferring final salary pension funds into various other pots, it’s important to consider what you’ll be giving up:

  • Entitlement to a fixed annual income for the rest of your life
  • A safe income that doesn’t fluctuate with volatile markets and share prices
  • Spousal and family benefits that come with a final salary scheme

 Example: Should I cash in my final salary pension?

An example is Mrs Dee (not her real name), 4 years ago she asked for her final salary transfer values, which came in at £250,000 – a nice sum, you may think. After reviewing all the facts and figures available, however, I advised Mrs Dee to leave her final salary pension where it was, which she duly did.

Towards the end of last year, because of favourable market conditions, I applied again to see the value of transferring her final salary . This one came in at just under £600,000.

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