There are many UK expat pension members, that have migrated abroad, who are existing members of UK pension schemes that date back years. Many UK pension schemes, from the 1980’s and before – such as Retirement Annuity Contracts (also known as section 226 contracts) – offered guaranteed annuity rates (GARs). For those UK expat pension members with GARs, that are contemplating a transfer to a QROPS (Qualifying Recognized Overseas Pension Scheme), should take advice as to whether they will lose the guarantees and the overall impact on their retirement income.
What are Guaranteed Annuity Rates?
A GAR is the minimum annuity that a pension member is offered as pension income when they retire. The annuity rate that is offered by the scheme provider is usually more generous than the standard annuity rates available today. Typically, the older plans would offer annuity rates of 10% or more – which is unheard of today.
Expat pension members that are fortunate enough to have GAR benefits in their pension, would have to think very carefully as to whether the QROPS income that they could potentially receive would be greater than the benefits that they are giving up from their existing scheme.
Factored into the equation would be the tax position that the individual would be in when receiving income. Would a QROPS, without guaranteed annuity rates, provide greater income solely because a QROPS could be more tax efficient? Would the investments, within a QROPS, have the potential to grow to a greater fund-size pre-retirement?
Global QROPS Ltd would be able to research the best options for those expats with GARs in their pensions.
