When you are planning to move abroad, your finances will be at the top of the list of things to think about. A Qualifying Recognised Overseas Pensions Scheme (QROPS) is an option for most expats, because they transfer their UK funds into a foreign scheme without a charge to UK income tax. Choosing an overseas scheme involves weighing different considerations like foreign tax, foreign pension rules and the flexibility to choose the assets that your fund will hold.
One issue that can sometimes be overlooked is what will happen when you pass away. A morbid thought perhaps, and not something that you may wish to dwell on. But even worse than considering your own demise is imagining the thought of your dependents being poorly provided for. Without making proper arrangements, your funds might not be distributed in the manner that you intend, and even worse, the taxman could be your biggest beneficiary.
In the UK, the default position is particularly unsatisfactory. Did you know that once you have purchased an annuity (which we all have to before we are 75 years old), the taxman gets most of your residue? And with the IHT threshold being the price of a modest family home, more and more families are finding that their loved one’s estate falls into the inheritance tax band.
This should be a major factor to consider, if you are undecided about whether to transfer your UK fund into a QROPS. Depending on the country that you choose to host your new scheme, it is possible to arrange your affairs so that your pension assets can be distributed directly to your beneficiaries, without paying tax in any jurisdiction. There is nothing underhand about this – a competent adviser will be able to assist you to plan your pensions in an IHT free way that is lawful. And when you sit down with a financial adviser to discuss your pension and inheritance tax, do not neglect the rest of your assets in your planning.
Finally, wherever you live, it’s prudent to make a will. This ensures that your assets are shared out among the people you have chosen. When you are living overseas, it’s important to consult a local lawyer to ensure that your wishes can in fact be legally carried out. In France in particular there are restrictions on how property can be dealt with in a probate situation. Aside from actually distributing the assets, a will makes the task of administering your estate much easier for those who are left behind, as information about your investments will be contained in one place.
