Retirement can be an exciting opportunity to start a brand-new chapter in your life. The daily grind is a thing of the past and the time has finally arrived to realise your dream of owning a home, perhaps somewhere in the sun. Or perhaps you’ve already made the leap and your overseas lifestyle is everything you hoped it would be.
You won’t be alone. According to the Office for National Statistics, 26% (207,300) of the 784,900 British citizens living in the EU are aged 65 and over. Spain and Portugal are particularly popular destinations, with sun seekers in this age bracket making up 41% and 39% of the British expat population respectively.
How do you fund a retirement overseas?
Pension transfers are a vital – and often the main – source of income for retired expats. These savings are reward for years of hard work throughout your career. So, make sure more of your hard-earned money reaches you by protecting the value of your transfers from fluctuating exchange rates.
When people leave British shores to retire overseas, they must decide what they are going to do with their UK pensions. Here, we explain what the options are and what you need to consider when transferring your pension overseas.
Your pension options when retiring abroad
If you have a defined contribution, or money purchase pension, you can either move your pension overseas, or you can leave your retirement savings in the UK and take your money in the country you’re living in.
If you move your pension overseas, be aware that this comes with its own costs and you may pay another penalty if you decide to move back to the UK at a later date. If you want to make sure more of your hard-earned money reaches you, a currency specialist can help you with a range of tools for international payments and guidance which will help you to protect the value of your transfers from fluctuating exchange rates.
What is a Qualifying Recognised Overseas Pension Scheme (QROPS)
If you’ve decided you want to move your pension abroad to an overseas plan, this must be a ‘Qualifying Recognised Overseas Pension Scheme,’ or QROPS. These schemes meet the same standards as pension schemes in the UK. If you transfer your pension savings that isn’t a QROPs there’ll be a hefty tax charge to pay.
Since March 2017, transfers to QROPS attract a 25% tax charge, until you are resident in the country where the country receiving your transfer is based, or you are resident in a country in the European Economic Area and the QROPs you are transferring to is in another EEA country. There are few other exceptions, so seek advice to see whether you are exempt from this charge.
Leaving your pension in the UK
If you choose not to transfer your pension and to leave it in the UK, you’ll need to move funds every month to the country you’re living in.
Bear in mind that UK pension providers may charge fees to pay money from your pension into an overseas bank account, so you may decide to make payments into a UK bank account. You can then transfer the money yourself into your overseas account.
It’s a good idea to seek advice from a foreign exchange specialist on the best way to do this. They can help you automate payments and can also fix the rate at which you move money, either the amount of sterling leaving the UK, or the amount of your local currency arriving in your account, so that you can be certain all your outgoings will be covered.
Financial planning is key to a successful move overseas
We’ve teamed up with currency specialist moneycorp to bring our readers the Telegraph International Money Transfers Service. As well as typically receiving better rates than your high street bank and expert currency market guidance, you can benefit from a range of tools that take the hassle out of making regular international payments. Find out how the Telegraph service could help you manage your pension transfers effectively:
Regular Payments Plan
Making regular pension transfers to your chosen destination doesn’t have to be a stressful chore. A Regular Payments Plan enables you to set up automated transfers to occur as frequently as you wish. Your money will be debited from your account, exchanged into the required currency and sent to your new home in accordance with your specified schedule.
By removing the need to make manual transfers each month, you can rest assured that your income will arrive in your account when you need it. As well as offering convenience, the service allows you to fix the exchange rate in a regular payment plan.
This protects the value of your pension transfers from all currency market movements, so you know how much you are sending and receiving every time.
Manage your pension transfers from anywhere in the world, at any time, using a secure online platform from moneycorp, our currency specialist partners for Telegraph International Money Transfers. You ca also access your account via a mobile app. This convenient tool can be used to set up a Regular Payments Plan and fix a rate.
Great exchange rates
It’s not just exchange rate fluctuations that can impact the value of your pension transfers. If you opt to use your bank to facilitate your requirements, the poor rates provided can unnecessarily drive up the cost of sending money overseas. We’ve partnered with a specialist international payments provider, moneycorp, to offer our readers rates that are more competitive than your high streets bank.
Low transfer fees
With Telegraph International Money Transfers, you pay low online transfer fees of just £4 (maximum of £15 over the phone) – while high street banks can typically charge up to £40 for each transfer.
Can you transfer final salary pensions overseas?
Transferring a final salary or defined benefit pension to an overseas scheme is unlikely to be a good idea as you’d lose out on a guaranteed level of pension in the future, and you must seek professional financial advice if you are considering taking this route.
If you want to retain these valuable guarantees, you may decide to leave your pension in the UK and then draw benefits from there. Again, currency risk and exchange commission can be managed by setting up an account with a foreign currency specialist who can advise on the most cost-effective way to transfer money into your local currency.
What happens to your State Pension?
You can claim your State Pension if you move abroad and it can be paid into a UK bank or building society account. It can also be paid into an overseas account but only in the local currency, which could mean you may receive more or less than if you’d remained in the UK, depending on how your local currency falls and rises against the value of the pound. Again, a foreign currency specialist will be able to suggest how to protect your money from exchange rate movements.
Before you move abroad, you need to inform the International Pension Centre and the Northern Ireland Pension Centre if you’re from Northern Ireland. You can find out more information on how to claim your State Pension abroad at the Gov.uk website.
Exchange your money with experts via The Telegraph International Money Transfers.
moneycorp is a trading name of TTT Moneycorp Limited which is authorised by the Financial Conduct Authority under the Payment Service Regulations 2017 (reference number 308919) for the provision of payment services.
The above article was created for Telegraph Financial Solutions, a member of The Telegraph Media Group. For more information on Telegraph Financial Solutions click here.