UK expat retirees advised to transfer personal pensions before Brexit

British expats overseas who’ve left their personal pension back in the UK are being advised to transfer it before Brexit kicks in.

The advice is aimed not just at UK expats already living abroad, but also to those planning to emigrate in the near future. It’s being spurred by increasing concern over the viability of company pensions following the Carillon collapse, as well as by the unpredictability of the Brexit effect on taxation of personal pension transfers. As regards British expat retirees settled in the EU, the recent introduction of a 25 per cent exit tax on pension transfers to products such as QROPS doesn’t apply, but financial experts believe once Brexit is a done deal different taxes will be brought in to cover British pension holders no longer in the UK.

The government, as usual, sees pensions as an easy hit for tax revenue, and is preparing to aggressively target non-resident citizens. Reasons for such a move include the specific design of pensions as regards tax relief, which result in an eventual return to the government of tax revenues. Upcoming changes are expected to hit hard on expats as a form of punishment for not putting the tax due back into the Treasury.

To avoid the tax grab, the first step is to carefully examine lifetime allowances on personal pensions. Before 2006, lifetime allowances were limitless, but were then set at 1.5 million before tax kicked in on savings, with the amount rising to 1.8 million by 2011. Since then, the tax-free allowance has steadily declined to its present level of one million, showing a 33 per cent reduction over the past three years, and it’s anyone’s guess how far it will decline over the next several years.

For non-residents living in the EU, the straightforward way out is to transfer the funds into a regulated HMRC -approved QROPS, with those about to retire overseas advised to do the same, taking into account its finalising shortly after arrival in the new country. The process is somewhat complex and admin-heavy, and needs the help of a fully-UK registered, reliable financial advisor experienced in QROPS transfers. ‘Do it Yourself’ is definitely not an option, but care should be taken when selecting an advisor.