Why it pays to retire abroad

Extract from Shelter Offshore 10 December 2010. Why it pays to retire abroad.

The big pension news in the UK this month is that annuity rates have risen for the first time in ages – much is being made of this increase in underlying offerings from the likes of Legal & General, Aviva, Aegon, Just Retirement, LV= and Canada Life…however, the fact of the matter is, the long-term outlook for annuities is actually far from positive

At the moment annuity providers pay men more than they pay women, but this is likely to change next year when it’s widely expected that the European Court of Justice will rule that this is unfair on sex equality grounds. Annuity rates for men will then probably fall – inflation is also starting to nip at the heels of annuity rates offered, and all in all, if you’re planning on retiring in the UK with a British pension, the outlook is far from positive for you.

However, we’re not in the business of promoting doom and gloom! Which is why we’re here to tell you that it can actually pay – quite literally – to retire abroad instead. Not only can you likely benefit from better weather, a lower cost of living and an improved lifestyle by retiring to a paradise in the sun overseas, there are also far, far better options open to many overseas retirees when it comes to benefiting from their pension income.

Have You Heard of QROPS?
QROPS is an acronym for qualifying recognised overseas pension schemes…they came into being in April 2006 when it was announced that British expatriates could move their pension benefits offshore and into these schemes with the UK tax authority’s approval.

The number one, overriding, most magnificent benefit of these schemes is that you do NOT have to buy an annuity with them – ever! Which means, you can enjoy your entire pension pot…and anything you don’t get around to spending can be left as an inheritance for the benefit of your heirs.

Can You Benefit from QROPS?
If you’re a UK resident and planning on remaining in the UK throughout retirement, or you’re a resident or citizen of the United States then you’re unlikely to be able to benefit from QROPS – but anyone else is eligible to explore the potential benefits.

QROPS are certainly going to be of interest to you if you’re an expat already, you’re planning on retiring abroad or living outside of the UK for at least 5 tax years, or if you’ve already retired overseas but not yet accessed your pension.

How You Can Benefit from QROPS and Why it May Pay to Retire Abroad
The main general benefits of QROPS are as follows, however, as you will already be aware, when it comes to any financial arrangement, the potential benefits and advantages will depend a great deal on your personal situation. So, ensure you get qualified financial advice before you make a firm decision about QROPS…

1) You do not need to buy an annuity with your QROPS
2) You can therefore leave any unspent money to your heirs
3) You have great investment freedom for the benefit of your money
4) You may be eligible to take a tax-free lump sum when you come to retire, this can be up to 30% of your pension pot
5) You can potentially tax efficiently draw down income from your QROPS (depending on where you’re tax resident)
6) You can invest and enjoy income/a lump sum in the currencies of your choice
7) You will enjoy greater investment confidentiality
8) There are also potential IHT benefits

In terms of why it may actually pay you to retire abroad – I expect you can already see how much more of your pension pot you could enjoy if you didn’t have to tie it in to an annuity. What’s more, by being able to invest and draw down in the currency of your choice, you can potentially avoid negative exchange rate fluctuations and currency conversion charges.

Furthermore, by having great investment freedom you can ensure your pot is well diversified and earning as much as it possibly can while you’re not spending it.

How to Learn More About QROPS
Annoyingly, QROPS are not directly accessible by an individual, rather the QROPS providers take pension transfers through appointed and qualified intermediaries. In part this is to protect you – after all, making any decision about the movement, reinvestment and management of your pension requires you receive independent, qualified and regulated advice.

Therefore, the QROPS providers want to ensure you are making the right move for your money, therefore they will only take your transfer in if it comes via an intermediary who they appoint as being qualified to offer best advice.

For you, this means you need to speak to a qualified, regulated and independent financial adviser to ensure you get best advice…

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