New private pension law?
Expats must wait and see what new laws say before they can work out how much they are likely to get under new private pension laws. Chancellor Philip Hammond heralded new rules with some passing remarks in his autumn statement 2016.
No one knows exactly what is on the way – but here is what financial experts have gleaned from his policies so far:
Section 615 retirement saving – These will close to new savings for British companies with employees based overseas from April 2017.
Hammond wants the tax treatment of foreign pensions more closely aligned with domestic pensions by bringing overseas retirement savings and lump sums under the same regime applied to the domestic schemes.
Section 615 pensions offer retirement savers benefits that are unavailable from other UK pensions, such as accessing the fund from the age of 18 and drawing down the entire fund without paying tax.
Qualifying Recognised Overseas Pension Scheme (QROPS) – These popular offshore pensions face a shake-up of how schemes qualify for QROPS status. No details have been revealed- other than a consultation is on the way.
What was confirmed is that a tax anomaly allowing expats who return to the UK to pay tax on 90% of their benefits will be scrapped. Instead, tax will be due on 100% of benefits drawn in the UK.
Hammond implied that retirement savers who did not intend to become expats were using the scheme to avoid tax on their QROPS benefits in the UK.
What the chancellor said about pensions
The Chancellor failed to give a start date for the new rules – but the offshore pensions industry is anticipating April 2017, when the next financial year begins.
“The tax treatment of foreign pensions will be more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones,” said Hammond in his autumn statement.
“The government will also close specialist Section 615 pension schemes for those employed abroad to new saving, extend from five to 10 years the taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief, align the tax treatment of funds transferred between registered pension schemes, and update the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes.”