Well over five million british residents
have decided to move abroad during the past 10 years and unfortunately,
recent problems in the strength of the GBP has affected those who rely
on their UK pension. Despite this though, many UK residents continue
to move abroad in search of a better life with the likes of Spain, Portugal
and Cyprus leading the list of destinations. Unfortunately these are
not considered to be tax havens however the likes of France, Spain,
Portugal, Malta and Cyprus do still have their own tax advantages for
people looking to move money over there.
One of the advantages to living abroad
is that unlike in the UK where by the time a pensioner reaches 75 they
are forced to buy an annuity or to go into a restrictive alternative
secured pension regime, this is not compulsory if you are living abroad.
For this very reason, many organisations and experts are claiming that
offshore pensions will be a big part of the future. These pensions dont
have any enforced annuity purchasing and allow users much more flexibility
to invest their money into residential property and withdraw as much
or as little as they require. The tax benefit comes in that they are
not required to pay UK Taxes after they die.
To move your pension abroad to benefit
from these various advantages, the first thing you need to do is transfer
the amount to a qualifying and recognised foreign overseas pension plan.
These were created two years ago and once the money is in the scheme,
it is outside Revenue and Customs jurisdiction so the rules no longer
apply. However, the provider of the pension will continue to report
details of the pension to the HMRC but will only do so until you have
been a resident outside of the UK for five years.
One of the biggest advantages to
deciding to join one of these overseas pension schemes is that you are
able to withdraw your income in which ever currency you wish which avoids
the problems caused by the weak GBP over the last few years. Other benefits
of joining into a qualifying recognised overseas pension plan:
- Tax free roll up pension plan.
- Funds will be held outside of wealth
tax and overseas succession taxes.
- No requirement to buy an insurance
annuity so that the fund can pass to benefit your heirs.
- No PAYE on the pension.
- No inheritance tax on the fund
upon your death. It will continue to benefit your heirs.
- This fund can provide an annuity
from a segregated part or from all of the fund.
- You can receive your income in
a different currency thus avoiding expensive money transfers.
Whilst there are tax advantages it
is also important to know that in some nations you could be liable to
pay wealth tax. In France, for example, you would be taxed on the full
value of all of your worldwide possessions whereas Portugal and Italy
do not have any form of wealth taxes.