Expat pensions: the ultimate guide
Your retirement years can be some of the happiest of your life. You have saved and worked hard to reach the point when you can relax and put all of life's little worries behind you.
However, there are many pitfalls and dangers which can hamper your retirement dreams and unfortunately many people more than happy to relieve you of your hard- earned cash.
I'm referring to unscrupulous offshore product vendors and the tricks they regularly use to take away everything you have so they can enjoy their life with your money.
Trick #1 - Transfer into an offshore investment bond
One of the most costly and common recommendations international advisers make is to transfer your pension into an offshore investment bond.
The adviser is likely to tell you that by doing this you'll have more control over your money and will be able to invest it more freely. They may even say there are tax bene ts because these schemes are based in lower tax jurisdictions such as the Isle of Man or Ireland.
In reality, moving your pension into an offshore investment bond without fully understanding how these often opaque investment platforms are commonly used could cost you serious money in hidden commissions and charge. Wrongly used, these vehicles will erode your pension and ll your adviser's back pocket. Worse still, there's usually no way back, as transferring out of these schemes can be extremely costly.
Offshore investment bonds can be a helpful saving tool if you are based in a high tax jurisdiction, but, dependent on the manner in which your adviser uses them, may make no sense as a place to put your pension savings as they will most likely restrict access and will potentially have heavy charges. The only reason many international advisers would want you to transfer your money is because they can make tens of thousands of pounds in commission. That's your pension money being paid to them.
Trick #2 - Transferring your money just to get a hefty commission
There are plenty of good reasons why you may want to transfer your pension. If you're planning to retire overseas, it could make nancial sense to take your pension out of the UK and use an overseas pension called a Qualifying Recognised Overseas Pension Scheme.
However, there are many advisers who do not fully understand the implications of moving a pension overseas, whether that is the tax implications or even simply the bene ts you will lose or gain.
By transferring your pension, regardless of whether this is the right decision for you, the adviser can make a seriously big commission. This is your pension money going into his pocket.
What's more, many overseas advisers are simply not quali ed to give you advice on your UK pension. The UK s nancial regulator, the Financial Conduct Authority, recognises this and has stipulated that only those authorised to do so can offer transfer advice on UK pensions - you can check our authorisation and what it looks like on the FCA website.
You wouldn t use an unquali ed doctor, dentist or even car mechanic, so why risk your nancial future on an unlicensed adviser? An inappropriate transfer could seriously damage your nancial wealth. Make sure your adviser is quali ed, and their rm regulated, before taking any advice.
Trick #3 - Toxic investments paying high commissions
Another reason advisers may be keen to transfer your pension into an opaque investment vehicle or another pension scheme, is so that they can ll your pension portfolio with toxic investments that pay lots of commission.
The last thing you want to do with your pension as you approach retirement is put it into high-risk investments which could potentially lose you all of your money.
Of course the silver-tongued salesman isn't going to tell you that. They want you to invest in funds which will pay lots of juicy commission. They're more likely to talk about "guaranteed returns" and "safe bets". And once you have made the investment and it has gone wrong, the likelihood is they will be nowhere to be found as, once they've cashed in the initial commission cheque, you're of no interest to them.
Just remember to ask yourself "what is this adviser getting out of me making this investment? Why is he so keen?". Remember the old adage: if it looks too good to be true, it probably is.
How to protect yourself from these tricks
In this guide we will give you all the facts and information you'll need to help you protect yourself and your pension from these tricks.
This guide is aimed at both British expatriates with pension schemes in the UK and who are planning to retire abroad, as well as those currently living in the UK but who are also considering retiring abroad.
It is also for UK "non-doms" who have permanently and de nitely left the UK but still have pension bene ts there.
The guide is split into three parts. Part one is for those with a "money purchase" pension scheme such as a personal pension, stakeholder pension, self invested personal pension (SIPP) or an additional voluntary contribution plan. These pensions are also collectively known as de ned contribution (DC) schemes and this is how we will largely refer to them throughout for ease.
Part two is for those who have a nal salary pension – also known as a de ned bene t (DB) scheme.
If you aren't sure what type of pension you have, ask your pension provider or contact us using the form at the back of the guide and we will assist you.
Part three offers some guidance on how you may want to structure your pension portfolio for investment purposes. We also highlight some very costly and common mistakes people make which can seriously affect their retirement income.
Pensions can be very complex and it is important that you seek independent advice from a quali ed and properly licensed nancial adviser before making any decisions. Please contact us using the form at the end of this guide if you would like to speak with one of our award winning team.
