In 2006 the UK government liberalised the UK pension regime, meaning that British expats and anyone who has previously worked in the UK and contributed to a UK pension plan for more than two years can elect to transfer their pension abroad. The receiving scheme has to be a qualifying recognised overseas pension scheme, known as a QROPS.
There are many potential benefits to such a transfer:
- A pension free from UK taxes
- Access to your pension from age 55
- Pension fund can be passed to beneficiaries free of tax
- Reduced income tax—your pension funds in the UK could be taxed up to 45%
- 100% of your pension fund can be passed to your beneficiaries
- Avoid getting stuck in an underfunded UK Final Salary Pension scheme. Currently over 75% of UK defined contribution schemes are currently underfunded, which may lead to reduced pension benefits.
- Flexibility of income in retirement
- Avoid exchange rate risk
- Establish control of investment choice
- Consolidation of schemes under one roof