Have you left, or are you leaving, the UK with £1,000,000 in pensions?

Many professionals – both British and other nationalities – leave the UK to continue their careers abroad with pension savings which could create an extra tax for them in retirement.

As companies react to fears around Brexit, many professionals are being relocated to other major financial centres across Europe. With all the usual problems associated with relocating, pensions are often low on the list of priorities.

However, by taking action now you are protecting yourself against a tax that could hit you hard in retirement.

UK pensions are subject to a ‘Lifetime Allowance’ (LTA) cap of £1,030,000 (rising annually with inflation) meaning that any accrued pension above this amount is subject to a ‘recovery charge’ of 25% in retirement.

As a non-UK resident you have the right to transfer your pension away from the UK and crystallise your benefits now so that the HMRC cannot impose its recovery charge on your pension in retirement.

This is best illustrated by a case study of a common scenario.

Pietro is 45 years old and has been working for two different companies in London since 2003. His current employer – a large international bank – is relocating staff to Milan. He has accumulated pensions in the UK with a combined value of £900,000. If he leaves these in the UK he will be able to access them from the age of 55 but he does not intend to access any of the funds until he is at least 60. Assuming they grow at a rate of 5% per annum their value at age 60 will be £1,871,000. The LTA, which increases with inflation, will have risen to a level of £1,386,244.

When Pietro decides to access his pensions they will be tested against the LTA: £1,871,000 – £1,386,244 = £484,756.

Pietro is therefore over his LTA by almost half a million pounds and will have to pay a 25% recovery charge on this amount as he draws his pension.

Alternatively, Pietro could transfer his pensions away from the UK now. By doing so, he crystallises the £900,000 which will be tested against the LTA upon the transfer and there will be no recovery charge to pay as he is below the current LTA of £1,030,000. All future growth will be free from the additional tax. Pietro will move his pension into a scheme recognised by HMRC which offers comparable benefits to a UK pension in terms of investment choice, management, cost and future access.

Furthermore, he will be removing other UK taxations in terms of income tax on the benefits and tax on what he leaves behind to heirs and beneficiaries upon his death.

In the event that Pietro returns to the UK in the future his LTA is reset and he is able to accumulate further pension benefits in the UK.

Valiant Wealth are independent financial advisors based in Italy. We are UK and EU regulated and have been advising and servicing clients with pension transfers since 2012. As rules and regulations constantly shift we are in the best position to advise you.

While there are many companies in our field very few offer the same transparent fee-based model. We are not remunerated by providers and are purpose-driven to guarantee the prosperity of our clients above our own.

We can happily provide testimonials and references from clients who work with us and have experienced positive results and a more secure financial future thanks to our advice and service.

If you want to discuss your situation through a free initial consultation then please contact us at info@valiant-wealth.com or via the form below.