There are many factors which will determine whether or not you should transfer from a UK pension scheme to a Recognised Overseas Pension Scheme (ROPS – formally known as QROPS). The days of a transfer to Ongobongoland, accessing 100% of your pension fund (tax free but less huge “adviser” charges), are gone. Now it is about detailed analysis where qualified advice is paramount. This is especially true for company pension schemes.The two main employer sponsored pension schemes types are Defined Contribution and Defined Benefit.
The former pays income based on a value of the fund accumulated and the
latter pays an income based on salary and years of service. Generally, a Defined Benefit scheme will be more attractive in that it has underlying guarantees which most Defined Contribution schemes will not have. A Personal Pension Plan is also a Defined Contribution scheme. There are a number of other personal pension arrangements. The normal retirement age for many company schemes is 65. Under recent law changes, members may be able to take their benefits earlier than this.
So why would one want to transfer?
- The client is 60 and wishes to take the maximum Pension Commencement Lump Sum(PCLS) and immediately draw an income from the remaining pension fund. For Defined Benefit schemes, with a normal retirement Age of 65, this may be possible.However, the trustees of the schemes will normally apply a factor to reduce the pension. This reduction is then fixed as the basis for futureincome.
- On transfer, the client can access a higher PCLS and greater income.
- The existing UK pension scheme is a Defined Contribution Scheme and does not have any guarantees.
- The existing UK pension scheme is a Defined Benefit Scheme which is in deficit meaning that there are not enough funds to cover future guarantees.
- The client is in ill health and the existing scheme terminates, or, if there is a dependants pension, is severely reduced on death. The client would like to pass the remaining fund to their dependants.
- The client wants flexibility as to how much income they receive, with the facility to turn the income “tap” on and off.
Transferring is not the best solution for everybody, and it is not possible to transfer certain schemes, but for a free analysis of your pension provision, contact me today at firstname.lastname@example.org or call (+34) 96 558 7633.