Click to download Tribute to His Majesty PDF

Live Phuket The Phuket News Kata Rocks The Phuket News Outrigger Koh Samui Beach Resort
The Phuket News Business News
The Phuket News Phuket | Thailand | World | Business | Q&A | Weird World XML, RSS, Feed
The Phuket News The Phuket News
The Phuket News

Pension cash QROPS Is your pension worth more than you think?

PHUKET: For any expat who has worked for a company in the UK for many years, and is a member of a final salary – or defined benefit – pension scheme, this could be the ideal opportunity to look at the transfer value of your pension.


Phuket Expat Finance

Sunday 9 October 2016, 11:00AM

Instead of paying a minimum of 20% taxation on income should the pension remain in the UK, a QROPS can reduce this to as little as 2.5%, if the pension is moved to a jurisdiction such as Gibraltar. Photo: AFP
Instead of paying a minimum of 20% taxation on income should the pension remain in the UK, a QROPS can reduce this to as little as 2.5%, if the pension is moved to a jurisdiction such as Gibraltar. Photo: AFP

Every final salary pension has a Cash Equivalent Transfer Value (CETV), which is the cash equivalent sum you would receive in exchange for replacing the pension from your old company with a qualifying overseas scheme.

Right now, transfer values are the highest they have ever been since QROPS became an option for final salary holders back in 2006. Most analysts also agree that we are not likely to see valuations this high ever again. That is because the inflation and interest rate assumptions trustees must use to calculate a transfer value have never been more favourable.

Although anyone who transfers a final salary pension does give up their rights to the final salary, they do receive in return a personalised pension with a significant sum of cash from which to fund that same pension income. Not only are they able to lock in this cash value now, but they will receive full control of how that money is allocated both now and throughout retirement. And provided they transfer to a jurisdiction and provider recognised by HM Revenue & Customs (HMRC), there are many other advantages that a QROPS can offer.

Every individual’s situation is unique, but there are many reasons why someone would consider transferring their pension. Consider for example an individual who is not married and is in ill health. If they remained in a final salary scheme and died two years after they began drawing benefits, then the entire balance of the pension pot would disappear into the coffers of the trustees. With a QROPS that person instead has the option of passing on the full cash value of their pension to other relatives, or even to a charitable cause.

An individual with a spouse and children will probably want to ensure that something is passed down after both their death and that of their spouse. Most final salary schemes pay half (sometimes two-thirds) of the original pension income to a surviving spouse, but after he/she dies all benefits cease. With a QROPS, the balance of the pension pot can be passed on to the family.

Irrespective of any health or family considerations, many expatriates like the fact that a QROPS allows them the possibility of taking their tax-free lump sum before age 65 (typically after age 55). And most QROPS jurisdictions also allow for larger lump sums than those available to UK pensions – usually up to 30 per cent, as opposed to 25%.

Some pension owners also wish for more flexibility and/or control over their pension investments. Rather than have company committees, trustees or a pension provider manage – or in the case of so many UK schemes, MIS-manage their money – those who prefer to choose exactly how their pension monies are invested may consider a pension transfer with an open-architecture investment platform. Open-architecture not only means investment freedom, but also currency freedom, i.e. they are not required to leave their money in Sterling, unless they consider it advantageous to do so.

Another issue for pension holders right now – and perhaps a deciding factor when considering whether or not to leave a scheme – is the current state of UK pension deficits. The combined deficits of FTSE 100 company schemes has doubled over the last year, and now stands at a staggering GB£63 billion (B2,831 trillion), according to pensions specialist LCP.

It is important to be aware that the same falling interest and bond rates, which have created extremely beneficial transfer values for scheme members, have simultaneously – and somewhat paradoxically – increased the pension deficits faced by their companies.

Coast Beach Club

Last but certainly not least, are the tax implications on the income itself. Instead of paying a minimum of 20% taxation on income should the pension remain in the UK, a QROPS can reduce this to as little as 2.5%, if the pension is moved to a jurisdiction such as Gibraltar.

The rise in transfer values has also moved many final salary scheme owners close to – or even above – the Lifetime Allowance. If you obtain a current transfer value and it has risen above GB£1 million, then you must act to protect your lifetime allowance. In 2010, the Lifetime Allowance was £1.8 million. In his most recent budget, however, George Osborne lowered the LTA once again from £1.25 million to £1 million, and further reductions are expected in the future.

Hence, if Inland Revenue determines you are liable for tax on your excess pension contributions, you would be paying 55% on the excess monies taken as a lump sum and 25% tax on excess monies taken as income. This tax is levied before you even receive your income, after which you are taxed on the pension income itself.

This should be addressed as soon as possible as some final salary scheme members with substantial CETVs may be able to save hundreds of thousands of pounds in unnecessary taxes. Depending on the size of the pot, some expats may be able to avoid this tax altogether.

Some scheme members are scurrying to act now because they also fear that the recent Brexit vote could mean that the UK leaves the EU and must no longer abide by EU legislation. Because QROPS was born from an EU Directive, if the UK leaves it could theoretically scrap all pension transfers, leaving those who have already moved their pensions the lucky ones.

Some expatriates have been holding off transferring their pensions until they either leave the company or decide whether or not they will retire abroad. But current transfer values make it worth at least obtaining an up-to-date CETV. This may prove to be the ideal time to make the move out of a defined benefit scheme.

If you are the owner of a UK final salary scheme, it is highly advisable to obtain a current transfer value right now. Obtaining a CETV does not commit you to move your pension, it simply gives you an indication of what you would receive as a cash lump sum, should you decide to move into a personalised scheme.


Phuket Expat Finance can help you obtain a valuation and provide you with a risk-free assessment of your final salary scheme. We would be happy to provide you with a no-obligation written report, and advise you on all the options available to you should you wish to consider a transfer. Email us at



The Phuket News
The Phuket News
Comment on this story
* Please login to comment. If you do not have an account please register below by simply entering a username, password and email address. You can still leave your comment below at the same time.
Comments Here:
    Forget your password?

Be the first to comment.

The Phuket News
The Phuket News The Phuket News The Phuket News
The Phuket News
Share this
The Phuket News
Have a news tip-off? Click here
The Phuket News
Related stories
The Phuket News
Phuket community

Recent Comments

Pounding conditions dismast boats in Phuket King’s Cup Regatta

I knew , I am from the 20 century and you guys live already in the 21. I rather stay with my old Swan there.What are you doing when it really get roug...(Read More)

Phuket illegal daily rental 'hotels' face deadline

“If they can’t make it in time, we will consider extending the registration period, but it must not be more than six months.” Sure....(Read More)

Austrian man, 75, dies after falling unconscious during snorkelling trip off Phuket

Sounds bit fishy. May jelly fish sting? They are there and also at Langkawi....(Read More)

Koh Samui, Koh Pha Ngan declared disaster areas

Wow, a sad start of the tourist High Season for these 2 islands. Is it not about time that Koh Samui starts to have all cables underground? It saves...(Read More)

Phuket illegal daily rental 'hotels' face deadline

Finally he is starting his job if the job will be done it will be a good thing for us who pay all taxes and liscences. Finish renting a big villa and...(Read More)

Phuket Opinion: No more beating about the bush

Every person who reads PN should have a right to express their opinion in comments without routinely being attacked, targetted or corrected by those w...(Read More)

Pounding conditions dismast boats in Phuket King’s Cup Regatta

Well Pauly44, there are regatta's and regatta's. ( or sub standard regatta's). But it is very disappointing when your riggings gives up d...(Read More)

Phuket Law: Home-ownership nominees – The naked truth

Yes Pinot, you are very right. I red yesterday in Phuket Gazette even an property add: Liquidation Sale In Kata! A penthouse plus 2 apartments, almo...(Read More)

Two foreigners dead in head-on collision in Phuket

And the road there is so wide, so straight, well lighted and so quiet at 02:55 AM....(Read More)

The Phuket News
Bangkok Hospital Phuket
Weird World
The Phuket News PHUKET LIFE
Phuket Arts
Phuket Community
Phuket Culture
Phuket Dining
Phuket Education
Phuket Entertainment
Phuket Environment
Phuket Health
Phuket People
Phuket Technology
Phuket Travel
Photo Galleries
The Phuket News PHUKET SPORT
Phuket Buy and Sell
Phuket Jobs
Phuket Property
Phuket Cars and Boats
Phuket Community
Phuket Services
The Phuket News The Phuket News PHUKET EVENTS
Phuket Event listings
Phuket Event calendar
Buy Tickets
Phuket Bars, pubs and clubs
Phuket Hotels and villas
Phuket Restaurants
Phuket Yellow Pages
The Phuket News BARGAINS
The Phuket News ABOUT US
The Company
Distribution points
Advertise with us
Pay for advert
Contact us
Content Google Map
Site map
Australian Visa Services
Currency - The Phuket News   Weather Report - The Phuket News   Surf Report - The Phuket News
LinkedIn - The Phuket News   Twitter - The Phuket News   YouTube - The Phuket News   Facebook - The Phuket News
Copyright © 2016 Class Act Media. All rights reserved. | Website usage terms and conditions | Privacy and Confidentiality Statement.