Planning for the future
The second key area for many returning to the UK will be pensions – not least because around a quarter of the 785,000 Brits living in Europe are over 65.
Many will have a Qualifying Recognised Overseas Pension Scheme (QROPS), essentially the expat pension. For those who repatriate, it’s simple enough to transfer the QROPS back into a UK registered scheme. This will have the attraction of simplicity if, for example, the client is not retired and will be contributing to a UK pension in future. HMRC treats the QROPS repatriation as a transfer, not contribution, and there are also no tax issues regarding the income eventually drawn.
Savers should be careful, however, and the lifetime allowance (LTA) may make them think twice. The LTA puts a £1 million limit (£1,055,000 to be precise) on pension contributions attracting tax relief. Anything over will be taxed at 25% if withdrawn as an income and 55% if accessed as a cash lump sum. Transferring a QROPS, perhaps into a UK self invested personal pension (SIPP), will bring that sum within the LTA calculation. Keeping it in the QROPS, by contrast, keeps it outside.
This is most obviously an issue for those who have already accumulated more than the allowance in their pension pots – usually retirees. But it’s also potentially an issue for those earlier on in their careers and returning to the UK. If future contributions – their own and their employers’ – risk taking them over the LTA, it may worth keeping the QROPS in place even if it does mean having two separate funds.
Again, there’s no simple rule. There are downsides to a QROPS, too – particularly when it comes to inheritance. UK pensions are very simple in regard to the fact that they don’t count as part of the member’s estate for inheritance tax purposes; the rules abroad are not always so kind to beneficiaries. Likewise, UK pension reforms mean British schemes provide flexible access, while some QROPS providers do not.
As ever, a lot will depend on the countries in question and clients’ individual circumstances. The first step for expats, then, is deciding whether or not to return to the UK. Once that decision is made, though, the second step has to be taking expert advice as soon as possible and getting a thorough assessment of their needs.
About Marc Beattie
Marc is COO at Arlo Wealth. He has been working in the Wealth Management and Private Banking Industry since 1999. Prior to co-founding Arlo Wealth & Arlo Group with his business partner Daniel Dickinson, Marc spent 5 years building the footprint of a UK Private Bank in the Middle East & Asia, assisting their rapid growth. Before this, Marc worked for 14 years at Lloyds Bank (International) in various countries including Brazil, Hong Kong, China as well as London, Jersey and the Isle of Man, always working with expatriate clients.
Marc is considered one of the UK’s leading Wealth Management professionals specialising in all matters impacting UK clients living & working Overseas & Non UK nationals with UK assets.
