GDPR is Coming

As the European Union’s General Data Protection Regulation (GDPR) continues to dominate the headlines, there’s never been a better time to catch up on what it all means.

The GDPR is a set of stringent data protection laws that will come into effect this month (May 2018) in the European Union.

Although the UK voted to leave the EU back in 2016, the details are still being sorted out. “Brexit” is a gradual process, and Britain is still technically part of the EU. Even if it was not, the UK has promised to adhere to an equally powerful and protective set of regulations.

The UK Department of Digital, Culture, Media and Sport (the “DCMS”) issued a Statement of Intent in which it outlines its data protection bill for the protection of UK citizens’ data. By all accounts, it is very similar to the GDPR.

Here’s a cheat sheet of critical points for understanding the GDPR:

The GDPR applies to organisations within and outside the EU that offer goods and services or monitor the behaviour of anyone in the EU. In other words, it could apply to any company in the world, as long as it is handling the data of EU citizens.

The GDPR expands the definition of personal data to include new kinds of data that may arise in the future. It is all-encompassing, unlike previous legislation.

Organisations must use simple language when asking individuals for their consent to collect personal data. They must also be clear about how they will use the personal data.

If there’s a breach at an organisation and data is compromised, that organisation must give notification within 72 hours.

Organisations must not hold data for longer than is necessary. They must also delete personal data when an individual makes such a request.

The key takeaway here is that EU regulators have stated that the GDPR rules will apply in countries that lie outside EU territory. That means any company collecting data on an EU citizen – no matter where in the world that citizen happens to be living – must adhere to the GDPR.

Since the GDPR applies to UK residents for the time being and since the DCMS bill offers protection on the same level, we can expect these rules to apply to British expats here in the United States, both now and in the foreseeable future, if the DCMS bill passes Parliament.

We will remain attentive to the matter, but in the meantime, we pledge to respect and protect our customers’ privacy. We handle all data collected with the strictest privacy protections in place.

Still have questions about the GDPR? Visit our privacy policy here.

Are Frozen Pensions Beginning to Thaw?

Over half a million retired expats receiving state pensions from the UK government find their weekly amount frozen at unbearably low levels. Although the problem of frozen state pensions is not a new one, there is now a glimmer of hope.

The Obvious Discrepancy of Pension Rates

Frozen pensions are a serious matter for British expats living in countries where state payouts remain stuck at levels too low to support a reasonable standard of living. Two decades ago, in 1997, the basic rate was £62.45 per week.

Someone retiring then who moved to a country where pensions don’t increase with inflation was living on approximately half of what today’s state pensions payout (Today’s weekly basic state pension rate is £122.30.).

It’s a Matter of Geography and Diplomacy

The situation sounds grim, but it’s not the same for all expats. Some—those who were lucky enough to have chosen certain countries to live out their retirement years—enjoy annual increases in their state pensions. That’s because the UK government has struck deals with those certain countries—deals that have a significant and lasting impact on the pensioners who retire there.

Pensioners headed for EU countries, the United States, the Philippines, Israel, and several other places get the full amount—that is, annual increases that keep up with inflation and the cost of living.

However, those who choose to retire in Canada, Africa, India, Australia, and about one hundred other countries never see any increases in their weekly state pension amount. If they return to the UK, however, they can apply to get their state pensions upgraded to the full amount, even if they only come back to their homeland for a short visit.

Glimmers of Hope in Parliament

MPs are aware of the inconsistency, but they disagree on how to solve the problem. Despite a Department for Work and Pensions spokesperson’s statement that there are no plans in place to review current policies, some MPs are taking action.

“We have a very clear position on this policy—which has remained consistent for around 70 years: the UK state pension is payable worldwide but is only uprated abroad where we have a legal requirement to do so or a reciprocal agreement is in place. There are no plans to review this.”

There is currently an All-Party Parliamentary Group on frozen British pensions, which rallies support for unfreezing the pension rates. The group also campaigns for policy reform. Following last April’s Parliamentary debate on overseas pensions, the group hopes to keep the momentum going by getting pensioners out to vote, among other activities. Other good news: the Labour Party backs the unfreezing of overseas state pensions, too.
The Barrier:  Huge Bill for Unfreezing the Pensions

The primary barrier to unfreezing pensions is cost. Some estimate that the cost would run around £580 million in the first year alone.

One solution is a partial uprating, which uprates frozen pensions going forward but not retroactively. The estimated cost for this would be about £30 million in the first year.

That cost could be offset, some argue, by the money saved every time a pensioner moves abroad. Once abroad, pensioners don’t draw on care services and other benefits, and they don’t use the NHS.

Is There an Injustice Here?

The argument for unfreezing state pensions often incorporates a plea to recognize a specific injustice: why does the government have agreements with some countries but not others?

Half of the British state pensioners whose rates are frozen live in Australia. Indeed, a significant portion of the countries where pensions are frozen encompasses Commonwealth countries.

Many believe this is a matter of social justice and that people who paid National Insurance during their working lives are entitled to a full pension—an indexed pension, that is.

However the case will be made—budget or social justice—it does seem time for frozen pensions to thaw out. We may be on the verge of something happening. For a full list of countries that are frozen, visit the British Age Pensioner Alliance website.
 

Ring in the New Year: What's in Store With the Changing U.S. Tax Code

A look at what's in store for U.S.-based British expats in 2018, including a glimpse at the Republicans' new tax plan plus a review of some important essentials.

If you've chosen to retire in the U.S., then no doubt you're keenly aware of the proposed tax changes. Spearheaded by President Trump and pushed through Congress by the Republicans, it has created quite a stir.

Changes for British Expats, Too

Expats are not immune to the changes. In fact, some will pertain directly to them in the years to come. The changes are generally positive, making the USA an even friendlier place to retire, financially speaking.

As you may already know, the UK has a social security agreement with the United States. Called a 'bilateral agreement' (or 'reciprocal agreement'), it protects your workers' rights while living in the USA as if you were a citizen.

Since the United States gives its own pensioners an annual increase in their Social Security checks, British expats will receive the same for their State pensions. Thus, as a British expat living in the United States, your State pension will increase every year.

That's not the case for UK state pensioners living in Canada and New Zealand, where UK pensions remain 'frozen' at their original amounts.

State Income Tax on Pensions

Here's another reminder of why a lot of British pensioners choose to retire in the United States. Not only do you receive an increase in your annual State pension in order to keep up with inflation, you also may enjoy your other pension distributions free of state income taxes. It varies state by state, so it's important to understand your own state's tax laws.

In Arizona, for example, Social Security benefits are exempt from taxation at the state level. Other retirement income like IRAs and private pensions are taxed at ordinary income rates.

New Mexico, on the other hand, does impose a tax on Social Security at the state level. There is special treatment for other types of retirement income, however. Every state is different, with different income tax ranges, different rules for retirement income, and different rules for inheritance taxes.

For inheritance taxes at the federal level, however, just one rule applies to everyone, and it's about to change.

The Federal Inheritance Tax

The new tax bill will greatly reduce the inheritance tax burden on taxpayers. Under the new rules, inheritance taxes now don't kick in until $11 million, which is nearly double the amount shielded under the old rules.

Keep in mind: This affects federal taxes, not state taxes. British expats who need to know about the inheritance tax in their state should consult with a financial advisor or contact the tax department in the state where they live.

Have More Tax-Related Questions?

The tax code is confusing enough, and when proposed changes like these come about, it's important that you understand what's in store for you. If you've got more questions about your UK pension and you live in the United States, please call. UK Pension Transfer LLC has more answers like these to help you navigate the US tax system during your retirement.


 

Tim Carroll Explains ‘Safeguarded Benefits’

Tim Carroll, President of UK Pension Transfer LLC, answers a common question we hear often in our line of work: What are safeguarded benefits?

Understanding pensions, benefits, and pension transfers used to be a fairly straightforward affair. You worked, saved, and drew your pension without little concern for how your savings were handled.

Now, however, the whole world of pension transfers is a confusing maze of jargon and ever-changing regulations. It can be hard to keep up, so we thought we’d get down to basics for a moment and go over what’s known as ‘safeguarded benefits’. You’ve seen the term before, but do you know precisely what it means and how these benefits have been affected by recent changes in legislation?

How Benefits Have Evolved

Officially, the idea of benefits that are ‘safeguarded’ has only been around since 2015, when they were introduced to the public as part of The Pension Schemes Act of 2015.

The Department for Work & Pensions defines safeguarded benefits as ‘pension benefits which are not money purchase or cash balance benefits’.

That’s a good start, but let’s flesh that out a bit with some further explanation in layman’s terms. Some pensions work on the premise of a promise. You pay in during your working years, and in exchange you expect the pension scheme to hold to a ‘promise’.

The Promise of Safeguarded Benefits

The promise of safeguarded benefits is that you will be receiving a level of secure pension income after you retire. The minimum amount of that income may be calculated in any of several different ways.

  1. It may be a promised level of income based on your final salary.
  2. Alternatively, it may be calculated based on your contributions.
  3. Finally, the promised amount may be a promised rate in which you’d have an option to convert what you’ve accumulated so far into income at some future time. That usually occurs when the member turns a certain age.

The Different Types of Safeguarded Benefits

  1. Guaranteed Minimum Pension (GMP). GMP is just what the name implies: there is a set minimum pension that’s guaranteed for men over 65 and women over 60. The payouts are distributed according to strict rules, which also govern survivor benefits. GMP benefits can not be drawn early unless certain conditions are met. Pensioners with a GMP build up their pension rights through an employer’s pension scheme. It replaces a portion of the State Pension.
  2. Guaranteed Annuity Rate (GAR). This offers defined benefits and a guaranteed minimum rate annuity when you retire.
  3. Defined Benefit. If your pension scheme is a DB pension (aka ‘final salary’ pension), your benefit is calculated according to your length of service and the salary you’re making at the time of retirement.

Giving Up Your Safeguarded Benefits

If you’d like to exercise your rights and convert, transfer, or cash out your safeguarded benefits, you’ll need to know about the new regulation that went into effect in April 2016 (per The Pension Schemes Act of 2015 mentioned earlier).

If your safeguarded benefits are worth more than £30,000, then you must seek financial advice before you transfer, convert, or cash out.

This is called the ‘Advice Requirement’ for safeguarded benefits, and it aims to prevent UK pensioners from handing over pension funds to shady schemes or getting scammed in some way. The rule is also designed to ensure that pensioners fully understand what they’re giving up when they convert safeguarded benefits to another form of benefit.

We hope that clears things up a bit. Here at UK Pension Transfer LLC, we know that the new pension rules can sometimes seem unclear. Don’t worry; we can help. If you’d like to learn more about safeguarded benefits or any aspect of pension transfers, we invite you to call Tim today at 1-770-391-0181.