What can you do with your UK pension ?

The financial crisis of 2008 has certainly taken its toll on UK pensions. If you take all of the companies in the FTSE 100 their combined pension's deficit is around 200 billion pounds, and it's not getting any better. Out of all the UK companies that offered Final Salary schemes only three remain open and are still accepting contributions. Some 87 per cent of final salary schemes are now closed, according to research released last month by the Association of Consulting Actuaries.

But it's not all doom and gloom if you're an expatriate with a UK pension or if you have a UK pension with the intention of living overseas in the future. Under European legislation, which came into force in April 2006, you can transfer your UK pension fund into a Qualifying Recognized Overseas Pension Scheme (QROPS). The QROPS pension schemes are set up by trustee's who are based offshore in jurisdictions such as Guernsey. The scheme must be recognized and registered with Her Majesty's Revenue & Customs (HMRC). Once the monies are transferred to the QROPS, this will usually be invested into an insurance company investment bond. This gives you a greater freedom of choice of where you invest your money compared to your UK pension. As the pension is held offshore the assets held within the QROPS grow free of taxation. One of the main advantages is that you do not have to purchase an annuity, therefore unlike an annuity (which on death dies with the pension holder or their spouse with the QROPS it does not, which allows discretion over the distribution of the residual fund to children and loved ones.

Other key features of the QROPS are that you can take 30% tax free cash and the earliest retirement age is 50 if the scheme is held in Guernsey. In a UK scheme you can only access 25% tax free and the earliest you can retire from April 6, 2010 has been extended to age 55.

Regional Manager, Alan Churchill at Global Wealth Management explained "we are getting more and more enquiries from expatriates in relation to their UK pensions and the problems that they are likely to face in the future".

To help those who would like to know more about QROPS, Global Wealth Management in conjunction with the leading QROPS provider Gower Pensions from Guernsey, will hold a seminar in Shanghai in the first week of March.

Article published in SH magazine February 2010