You don’t’ have to be a premier league footballer, a Formula ONE racing driver or lets face it a British Peer! UK expats can benefit from tax havens for their funds and their pensions too. Have a look at an interesting Daily Telegraph article. http://bit.ly/cBEGDM
The annual appraisal of the state pension is traditionally based on September’s inflation results. The retail prices index was – 1.3% the previous month and was expected to be in parity or less for this month.
The resulting figures will see the state pension increase a mere £2.40 from next April, half the rise brought about the previous year.
The paltry increase will see pension payments increase from £95.25 to £97.65 per week, which prompted furious outbursts from politicians and Age Concern, whom are lobbying for reform in the UK pensions system.
It is thought that thousands of men and women already over the state retirement age have put off full retirement to earn an extra income for their domestic or QROPS overseas pension.
The MPs expenses scandal resulted in decreased popularity and the press scrutinizing their spending and entitlements. MPs are now permitted to an annual retirement income of around £40,000, calculated on this being two thirds of their final salary. So, what about the rest of us, who has the best deal?
Well, let’s look at the public sector first. It’s a widespread belief that the public sector are paid less than the private sector, but make up for this in better working hours, job security and boosted pension funds. On balance, even in today’s uncertain times, what could be safer than a final salary pension fund backed by UK plc? And add to this the fact that they are index linked – the monies paid out will be a fairer reflection of the member’s true, rather than their estimated, cost of living. Unfortunately it’s not as straightforward as it would seem as not all public sector pensions are created equal.
Armed Forces personnel, on the whole, make no financial contributions to their pensions, however the rest of the public sector workforce contribute six to eleven percent of their salary, the rest being made up by the British taxpayer. It has been estimated, by The Pensions Policy Institute, that the total annual bill is £16 billion. The Government have taken steps to lessen this amount; by raising the retirement age of civil servants, teachers and NHS workers’ to 65, but this does not affect those already qualifying for a public sector pension as they are bound by whatever age the scheme was originally set.
For private sector workers, 80% of final salary schemes are not available to new entrants. More worryingly even those in active schemes are not secure, with defined benefits schemes being changed on the grounds of lack of affordability, and being transferred into defined contributions schemes. So it seems that public sector employees may get a better arrangement after all despite the lower wage than their private sector counterparts.
Therefore if you are not willing or able to change career to safeguard a better pension, what can you do to make yours as fruitful as possible? Number 1. Take professional advice about the correct pension for your circumstances 2. Arrange it as soon as possible and finally 3. Contribute the maximum you can.
Free QROPS guide;-
A SIPP or to give it its full title a “self invested personal pension” is in itself a pension plan. It is a “wrapper” that encompasses all your investments until you retire and start to draw a pension. In essence a SIPP allows you to make your own investment decisions from a barrel of pre-approved investment options. A good self managed or third party managed SIPP can be extremely beneficial in terms of tax relief and pension income when you retire compared to standard pension plans.
Typical approved investments include government securities, insurance company funds, investment and unit trusts, traded endowment policies, National Savings products and commercial property; the list is by no means comprehensive and different providers will offer and specialise in different investments depending on your personal circumstances and aspirations.
Free QROPS guide;-
Is there any point in opening an offshore savings account? This seems to be a big question for many people leaving the UK. Post emigration many expats continue to use the British banking system, in part due to familiarity and recourse for any discrepancies or queries that may occur with their bank account. However, this decision has to offset with the substantial benefits that can be realised once you lose your tax residency status in the UK from even the simplest form of offshore savings account.
You can also save offshore for your pension – and you can do so through a more conventional offshore pension plan such as QROPS. The offshore savings and investment paradigm has dramatically changed in recent years. Its no longer seen as slightly dodgy to have offshore accounts in fact expats who don’t are seen as behind the times.
In essence, to be free from the rules and restrictions associated with UK pensions after five complete tax years of non-residence. Then benefits are aplenty! Such as QROPS benefits on death are generally free from tax contributing to a substantial tax saving. Some QROPS enable a much higher level of income to be drawn at a lower tax rate. UK pension schemes restrict the lump sum that can be taken to 25% of the fund; many QROPS schemes do not have this restriction. QROPS generally do not have investment restrictions and allow the use of an investment manager of your choice. The list goes on, expats make sure you don’t miss out.
After the G20 summit amidst growing concerns over the UK and global economy the UK chancellor Alistair Darling delivered his second greatly anticipated budget on 22 April. One notable alteration is that from 2011 people with taxable income of £150,000 or over will have tax relief on their pension contributions reduced to basic rate. Provisions are to be made for a special tax bills for payments made after May if the payments exceed £20K and they are a change from normal pension accruals or regular payments.
