If the number of visitors to the immigration websites of popular expat destinations is anything to go by, Brexit may pave the way for a new phenomenon – Brexpats – Brits moving overseas as a result of the referendum result.
They will join the large numbers of retirees who are choosing to spend their golden years abroad. According to research conducted by a well-known global asset management company last year, more than half of wealthy retirees plan to spend most of their time overseas. With the implications of the Brexit vote outcome on EU residency for UK passport holders unclear, it may be the case that more may head to locations in this part of the world such as Singapore, Thailand, Malaysia, Indonesia and the Philippines.
For Brits – or Brexpats – planning a retirement overseas, now may be a good time to review your retirement arrangements and pension provisions. Despite all of the uncertainties around Brexit there has been no immediate indication that some of the useful offshore retirement planning techniques have been affected.
This does include Recognised Overseas Pension Schemes – ROPS (formerly known as QROPs), which have proved very popular with UK expatriates since their introduction by the UK Government in April 2006.
At their most basic ROPs enable retirees to transfer UK pensions into a registered and regulated scheme and in most cases without a UK tax charge (for larger funds this may not be the case).
Some of the benefits of ROPS can include low income tax on pension income payments in the country of residence, improved benefits on death and avoiding the shrinking UK lifetime allowance for pensions (now at £1 million, from a peak of £1.8 million in 2011/2012!).
A key consideration is the ROPs jurisdiction which needs to suit the local tax rules with the country you are retiring to.
Benefits from these vehicles are available after age 55 which is the same as the UK and the methods of taking income and the income levels are also similar. However, there can be higher tax-free cash lump sums can be available for long-term non-UK residents.
Flexi-Access Drawdown benefits like those introduced recently in the UK, can also be accessed via a small number of providers in one popular ROPS jurisdiction.
Most ROPS are based on the domicile of the scheme that is paying benefits and the double taxation agreements (DTA) in place with your chosen retirement location. Another popular jurisdiction has chosen instead to agree with HMRC a lower rate of tax at source (although this will not get around local tax reporting requirements for where one retires to).
Clearly, these vehicles (ROPS) require a transfer from an existing UK pension arrangement to an offshore pension plan. This in itself is fraught with complexities and it is highly important to seek detailed comprehensive advice from an appropriate pension’s expert.
There are other tax efficient solutions for UK pension arrangements such as utilising a UK double taxation agreement with the country one resides (if it is favourable) as well as Foreign Service Relief which can be used to remove UK pensions from the UK PAYE system in certain circumstances.
David Pugh, Director, The Fry Group (Singapore) Pte Ltd.