Maximizing your pension begins with a solid grasp of the scene when it comes to transferring your pension overseas. Here’s a quick and handy guide so you can start getting the most out of your retirement funds as quickly as possible.
UK Pension Transfers, Demystified with 5 Easy Facts
1. Your choices matter.
Don’t rest with the status quo: maximize instead! If you have left the UK permanently but have worked in the UK at some point in your past, you most likely have some type of UK pension scheme you’d like to maximize.
The part that many pensioners don’t understand is this: unless you actively seek out the best way to manage your pensions(s), certain conditions may prevent you from maximizing your pensions once you move overseas permanently. That can result in a less-than-stellar outcome after all those long years of saving.
2. There aren’t too many options anymore for your State Pension.
Due to recent changes in UK law, state pensions are no longer eligible for transfer to pension schemes outside the UK. You may, of course, have your state pension payments sent to you wherever you decide to live.
As an expat living in the USA, you already have an advantage when it comes to your state pension: you will benefit from updates due to inflation. That means: your state pension payments increase over time, in order to adjust for inflation.
Believe it or not, this is not the case with UK expatriates in many other countries (Canada, for example).
3. You can make the most difference with a private or occupational pension.
While you can’t transfer your state pension overseas, you do have options when it comes to your private or company pensions. And why should you bother? After all, you can draw these pensions while living abroad.
Here’s where you can make the most difference in maximizing your pensions:
By moving your private or company (“occupational”) pension overseas, you may be setting yourself up for some pretty significant tax savings.
But that’s not all. By transferring your pension overseas, you also reduce the risk of losing value due to currency exchange. A UK pension is tied to the Pound, and when the Pound loses value, down goes your pension check.
Finally, you may also be able to take a higher lump sum when you transfer your pension, without paying taxes.
4. Frozen Occupational Pensions Cannot be Exported into an American IRA or 401(k)
So-called “frozen” occupational pensions are those UK pensions which were gained under former employers, but which are now “stranded” because you no longer work there.
If you currently work in the USA and have a 401(k) plan, it would be convenient to roll your old UK occupational pension into your current plan. Or, if you have an Individual Retirement Account in the U.S., same thing: it would be great to consolidate.
Neither is allowed, however, due to very strict rules imposed by the United States IRS. UK pension plans aren’t about to try and qualify themselves, either.
5. You can move some UK pensions into a Qualifying Recognised Overseas Pension Scheme (QROPS).
The great news is: QROPS makes it possible to transfer your non-state UK pension to another (qualified) country. However, the rules are complex and strict. The many possible pitfalls make it abundantly clear that this should not be undertaken without the advice of an expert financial adviser.
That goes for any move you’re considering making with your pension funds: consult a financial adviser first. UK Pension Transfer LLC offers a free UK pension review: wouldn’t you like to find out how to maximize your pension funds? Just click below to get started today on maximizing your pension funds.