A Guide2 Pension Options for Expatriates in France

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What are my options if I have pension benefits left in the UK?

 

If you have not yet retired, you may have pension benefits left in the UK. This article looks at how they might be treated, and the options you might have open to you.

 

A lot of people think that when they finish paying into a pension, or leave an employer, that their benefits are ‘frozen’. This however is, in the main, incorrect.

 

If you have pension benefits through a previous employer, in a Final Salary pension scheme, the pension that you were entitled to when you left will be increased, typically in line with UK inflation, up to retirement.

 

If you have a personal pension, or company pension benefits in a ‘Money Purchase’ scheme, then how these grow will depend very much on the investment fund performance. In general, historically equities outperform other asset classes, and you should remember that your pension fund is likely to be a long-term investment, but you should always make sure that you feel comfortable with the level of investment risk within your pension funds.

 

The options available to you are:

 

1) Do nothing

2) Transfer to another arrangement in the UK

3) Transfer to an arrangement overseas (QROPS)

 

In many ways, option 1 might be the most suitable. If you have final salary benefits, then these will be lost if you transfer away from the scheme.

 

It is possible to transfer from a final salary scheme. The scheme will offer a ‘transfer value’ for you to transfer to another arrangement. Due to market volatility and falling annuity rates, we have found that most of these transfer values would need to achieve substantial growth (higher than 10% per year up to retirement) to provide the same level of income as the final salary scheme. Therefore it is usually more suitable to retain the benefits in the scheme.

 

Options 2 and 3 might be attractive if you have a number of private pension arrangements, and are looking to ‘tidy up’ your pensions, and obtain perhaps a greater control over the investments. However, you should be careful as some private pensions will have charges applying if you transfer, and could contain some very good guarantees that would be lost on transfer. Some pension providers in the 1980’s offered guaranteed annuity rates which at the time were unattractive, but due to the falls in annuity rates now represent good value for money.

 

Transferring pension funds abroad has become the ‘hot topic’ in recent months. To transfer a pension fund overseas, the overseas scheme must register to be a Qualifying Recognised Overseas Pension Scheme (QROPS) with HMRC.

 

There are a number of rules that a QROPS must adhere to, the most notable of which is that the majority of the fund must be used to provide an income for life. If a QROPS offers you access to the fund, it is likely that it is not a ‘bona-fide’ QROPS, and you risk a 55% tax charge if the scheme is found to have been ineligible.

 

A QROPS does offer the flexibility of drawing an income in euros, but there are risks and if you are not looking to draw benefits for a number of years, then a UK pension fund will likely offer a cheaper alternative, whilst keeping open the possibility of transferring the fund overseas.

 

You should regularly review your pension arrangements to make sure that they continue to match your requirements, and are on track to provide your required income in retirement. If you require a review of your pension funds, an Independent Financial Adviser will offer unbiased advice on the most suitable course of action.

 

Robert Brealey

Pension Consultant at Siddalls

Financial Advice and Financial Solutions for Your Life Abroad

 

 For more information/advice contact Jennie Poate, Siddalls, Normandy & Picardy region on: +33688475303

 
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Any opinions or advice contained in this article are subject to the terms and conditions expressed in the governing Siddalls France Terms of Business