There are many types of pension schemes and understanding their benefits and restrictions for many can prove troublesome. Although there are UK Government backed advice centres, they themselves often direct you to a UK financial advisor, who will not have the knowledge or experience to advise you on what is best for you and your finances in Spain.
Moving overseas may provide further opportunities not available to those that remain in the UK and advice can be given on Final pension salary schemes, UK Private Pensions, SIPP’s and Qualified Overseas Pension Schemes. We will provide a detailed examination of your existing schemes and advise if a transfer is in your best interest.
So, what are some of the considerations that you need to think about regarding your UK pensions schemes.
- If you are over 55 years of age and your scheme allows you to take your Pension Commencement Lump Sum, it may be advantageous to do so before becoming a Spanish Tax Resident. The 25% tax free allowance is only beneficial to UK Tax Residents, if you pay your tax in Spain then this payment will be added to other income in the year that it is received and taxed at your marginal rate. This could lead to paying even more than your normal rate of tax if it pushes you into a higher rate tax bracket.
- Does your existing scheme allow for flexible access, UK legislation changed some years ago under George Osborne and it’s now possible to take as much or as little income as you wish from your pension either as regular or ad-hoc withdrawals. Again, a fantastic tax planning opportunity as this means you can structure your payments and take more in the years where you may have received less income from other sources and less in the years where it’s not required or where it may lead to having to pay additional tax.
- Do you know where your funds are invested and what the returns are, not all schemes are transparent, and it can be difficult to determine what you are paying for and what the performance has been. Most pension companies that we use provide a facility for 24/7 up to date valuations with clear charging structures, this can over the life of your pension increase the effect on its value significantly.
- Are you invested in the right currency, its almost certain that a UK pension will be held in Sterling, however as a resident in Europe there is an opportunity to hold the underlying investment in Euros and therefore reducing currency risk when benefits are taken, investment growth can easily be wiped out by a reduction in the exchange rate.
- It may also be worth considering amalgamating smaller pensions into one, pulling smaller pensions together can allow more choice on how the pension is invested, reduce running costs and provide wider exposure to underlying investment markets. Having 4 or 5 small pots is hard to administer and keep track off and with the increasing bureaucracy of UK financial services providers for overseas residents can lead to frustration even undertaking what should be easy tasks such as changing your address.
The points above are just a small sample of some of the areas that require consideration, there are too many to list here but if you have a UK pension and are unsure on how or when you can access it or what benefits it may provide, contact our qualified and regulated adviser that is on hand to answer your questions and see you through the pension maze.
Tel. +34 966761741