UK Expat Pension Members Decide To Retire Overseas

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According to a recent study, conducted by a prominent financial institution in the Isle of Man, UK expats that have taken up positions in employment overseas – throughout their working life – are deciding to stay abroad in their retirement rather than return to the UK.

The main reason cited for remaining abroad, throughout retirement, is the cost of retiring in the UK is perceived to be too high. Indeed, the figures in the study suggested that £400,000 was the minimum level of wealth needed in the UK for a successful retirement.

Given this situation, what are the options for UK expat pension members that have accrued benefits in UK pension schemes, as well as benefits in their foreign employment schemes?

One of the main disadvantages of UK pensions, for UK expat pension members, is that the income from a scheme (either in the form of an annuity or drawdown) is assessable for tax in the UK – should the member return to the UK in retirement.

Tax on retirement income is not applicable from every type of scheme for every jurisdiction or country in the world, however, which can give a UK expat pension member the choice of overseas pension scheme to transfer their UK funds to – providing it is a QROPS (Qualifying Recognised Overseas Pension Scheme).

If an individual has retired to country that is a tax haven, such as the United Arab Emirates, or to a country that does not tax pension income from their own pension schemes (such as Australia and New Zealand), a transfer to an appropriate QROPS could lead to a tax free retirement abroad – which can appeal more to an individual than retirement in the UK.