What to do with your UK Pension when you move to France?
Since Brexit and the date the UK left the European Union, UK Pension Providers can no longer service French and European residents, or offer advice on their pensions. So what should you do if you already live abroad, or plan a move?
UK Pensions Before Brexit
Before Brexit, the UK was part of the EU single market, which also included the provision of financial services and advice. This mean that UK companies could provide regulated advice to non-UK residents, under European Law.
This meant that UK residents could continue to benefit from all the options of their UK pensions. For example, if an individual held a personal pension with Aviva, or Standard Life, they would be able to do the following:
1) Leave the funds invested and do nothing
2) Withdraw their pension commencement lump sum (25% tax-free cash amount) and leave the remainder invested
3) Take their 25% payment and then enter into a full flexi-access draw-down (i.e take an income of any amount as and when they please)
These are the above rules of pension freedoms, and are designed to give people control of their retirement funds. Further to the above, clients of pension funds would also be able to review their investments and make changes to their portfolios.
As you can imagine, post-Brexit the above rules no longer apply to UK pension accounts for European residents. Whilst the exact rules and offerings will depend on your scheme and provider, we are generally seeing the following options provided to European residents:
1) Take the 25% and purchase an annuity from the pension provider
2) Take the entirety of the pension as one lump sum payment
3) Transfer the pension to an International solution
On top of the above, as UK providers can no longer provide any investment advice to European clients, portfolios may become unsuitable and also not in line with the risk profiles of policy holders. This often means that clients will have to make their own investment decisions, as opposed to receiving regulated advice.
What Are My Options?
Generally speaking, there are 3 options that residents in France (and indeed anywhere else in Europe) can exercise:
1) Do nothing, and accept that your UK pension will give you limited options. Whilst this may mean you do not need to pay for the services of an adviser, this can result in a very large and undesirable tax bills on the individual. For example, cashing in a 250,000 pound pension in France will result in tax payable as income on this amount. Annuity rates are also very low, meaning the income derived from purchasing an annuity will often be less than what could be achieved from a long-term investment strategy.
2) Transfer to an International SIPP. An International SIPP is a HMRC approved and UK regulated pension scheme that is specifically built for non-UK residents. By being a product that is designed for non-residents, it will allow full flexi-access draw down for policy holders, as well as the ability to hold in all major currencies – something that has become particularly relevant post Brexit and this year with all of the recent currency fluctuations.
3) Transfer to a QROPS (Qualifying Recognised Overseas Pension Scheme). A QROPS is typically based out of Malta or Gibraltar, and is particularly beneficial if the value of your UK pensions are approaching the lifetime allowance, as there is no lifetime allowance applicable within a QROPS. The lifetime allowance is an additional tax that is applied to UK pensions that have a value of over 1 million gbp.
What Should I Do?
The answer to this will depend entirely on your circumstances, as well as your goals moving forward. Typically speaking, for smaller UK pensions an International SIPP will be the best option moving forward, and a QROPS for larger values.
However, it is important to take regulated financial advice in any scenario to ensure that your retirement provisions remain appropriate, and to secure financial freedom in your retirement journey as an Expat.
At Harrison Brook, we provide fee-only, fully independent advice. This means we are not paid to sell any product, only to advise you on the best solution that matches your needs and objectives. Get in touch today to find out more.