European expats worried about what happens to their UK pensions if Brexit negotiations fail to deliver a residency deal that allows them to stay in Britain need not worry.
The money they have paid into personal pensions or in readiness to draw the state pension belongs to them and no one can touch the funds.
Moving to another country in Europe or elsewhere in the world has no bearing on who the cash belongs to.
The big issues are not about ownership of the cash, but how much tax is paid on withdrawing money from a pension and if currency exchange rate fluctuations eat into spending power.
The option to withdraw money from the age of 55 years old under UK pension freedoms is also important to many retirement savers.
Tax and currency exchange problems
One way of avoiding both problems is to switch the money from an onshore scheme to an offshore Qualifying Recognised Overseas Pension Scheme (QROPS).
QROPS pay benefits in many major currencies without tax deducted at source.
Depending on where the QROPS is based and the terms of any double taxation agreement, local rules where the retirement saver lives will likely determine if any tax is due.
And the British government has just lifted the bar that stopped many QROPS from offering pension freedoms along the same lines as those in the UK.
However, few financial centres and providers can offer this – although Malta QROPS have pension freedoms built-in to many schemes.
Other pension options
If a QROPS is unavailable or unsuitable, then other options can include a SIPP or leaving the money in a workplace scheme.
Neither alternative resolves all the problems of pensions for expats like a QROPS, as UK based providers are likely to pay pensions in Sterling and with tax deducted at source.
Some providers will pay into a foreign bank, but in Sterling, which can be expensive in these days of a low value Pound.
For retirement savers looking for more flexible and wider investment options, QROPS and SIPPs are similar – although SIPPs are UK-centric and QROPS offer more international opportunities.
The least flexible option is a workplace pension, but these may come with payment guarantees and other benefits that cannot be matched by a QROPS or SIPP.
