GWM Outlines UK Budget Impact on British Expats' Pensions

• Overseas pension transfers will be subject to a new 25% tax from March 9th
• Guardian Wealth Management highlights possible ramifications to British expats in GCC

March 13th 2017, Dubai, UAE:  The UK’s spring budget 2017 has major implications for British pension holders living in the GCC, taxation experts at Guardian Wealth Management have warned.

UK Chancellor Phillip Hammond’s Spring Budget last Wednesday brought in a 25% charge to transfer UK pensions to Qualifying Recognised Overseas Pension Schemes (QROPS) for most living outside the European Economic Area.

This means Brits living in the GCC will have to pay extra if they want to move their UK-based pensions to a different jurisdiction. For example, a typical transfer of a pension fund of £400,000 will be subject to a £100,000 tax charge. 

Darren Jones, Training & Technical Director at Guardian Wealth Management, and an expert of UK tax law, said: “This new transfer charge is aimed at expats and is HMRC’s way of recouping the valuable tax relief given to pension savers during their time working in the UK. It is a change I have been predicting for some time and now means seeking the guidance of an expert in this complex area is even more vital.”

“The new rule means the pensions options open to expats are significantly changing and, with Brexit on the horizon and more uncertainty to come, it is important for expats to assess their retirement options now.”

QROPS is a pension plan that “qualifies” with HM Revenue & Customs (HMRC) rules and is officially “recognised” by the body, but is based outside the UK. Benefits of these plans include tax efficiency, flexibility, investment freedom and growth opportunity.

Other recent changes to UK Pensions mean there are many factors to consider with retirement planning. This includes the extension to member payment provisions for expats, which will now apply for 10 years of residency rather than the previous five years. Additionally, QROPS providers will no longer have to earmark 70% of a pension fund to provide an income in retirement. However, it will now become important that the QROPS jurisdiction has a formal pension regulator.

Another notable change in rules if for those residents who have buy-to-let properties in the UK, who may now begin to pay tax on turnover rather than profit, following restrictions on how mortgage interest can be offset against income. This is a change which will gradually be brought in over the next four years.
Mr Jones said: “Part of the benefits of being an expat is taking advantage of tax-free status. However, it is important for GCC residents to keep up-to-date with the facts and the tax rules in their home countries for the day they may choose to return home.

“At Guardian Wealth Management, we understand the best options available to expats. Even though QROPS have suddenly become much more complex, there are alternatives like self-invested person pensions (SIPPs) that may be suitable.

“Following the implementation of a favourable double taxation treaty between the UAE and the UK, the best thing to do is speak to an advisor who can base the options on your personal situation and goals.”

Guardian Wealth Management offers sound and regulated financial advice, specialising in long-term financial planning for its clients.