Pension Transfer
If you have a pension and are considering transferring your benefits, there are two main types of pension:
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Defined benefit schemes (often referred to as a ‘final salary scheme’), and
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Defined contribution schemes (often known as "money purchase" schemes)
Defined Benefit Pension Schemes
Defined benefit (final salary) schemes are often described as ‘gold-plated’ because they offer guaranteed benefits at retirement.
However, they have faced many challenges in recent times as employers struggle to fund them adequately.
This scheme promises to pay you an income based on the final salary you retired on. You can carry out an overseas pension transfer into a QROP or transfer utilising a UK SIPP.
Defined Contribution Schemes
These schemes do not have the guarantees that defined benefit schemes offer. Instead, the pension at retirement relies upon three main factors – the level of contributions paid, the investment return earned by the fund and the rate at which that fund is converted into an income (the annuity rate).
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Many people who retire abroad find that they have a mixture of defined benefit and defined contribution arrangements. There are two main options when looking to transfer your pension :
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Self-Invested Pension Plan (SIPP)
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Qualifying Recognised Overseas Pension Scheme (QROPS)
The Finance Jargon?
SIPP
A SIPP is simply a personal pension, but with wider investment powers.
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An overseas pension transfer to a SIPP is an option for those living abroad, as well as those based in the UK, to go ahead with a pension transfer.
If you transfer your benefits to a SIPP, the benefits will still be subject to UK pension regulations.
QROPS
A QROPS is an international pension plan, which is often the preferred vehicle for international pension transfers.
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If you transfer to a QROPS, the benefits broadly cease to be governed by UK pension regulations, although there are certain reporting and other requirements that must be met.
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In addition to these options there is also a Qualified Non-UK Pension Scheme (QNUPS)
QNUPS
A QNUPS is not a specific scheme or product – it is a term given to schemes that comply with the International Organisation in the UK International Organisations Act 1968 Section 1(a).
Offering a degree of flexibility, and free from the UK’s inheritance tax, anyone is eligible to invest in a QNUPS, provided their country of residence allows this.
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These expat pension schemes enable you to hold assets in a variety of areas, including property, investments, fine wines, and art.
