At deVere Philippines we believe that the moment you reach that age of retirement, should be the same moment you can finally reap the benefits you worked so hard to achieve. Furthermore, we understand the appeal of holding your retirement abroad.
However, you might find that retiring overseas could place you in a challenging position, especially when considering the true costs needed to support the desired lifestyle you would like to have during your retirement.
Our financial advisers in the Philippines can help you identify these factors, highlight key areas to consider when reviewing your retirement plans and give you various solutions.
Backed by the resources of the deVere Group, a leading financial advisory firm, we can carefully construct tailored retirement planning options that consider your needs and requirements, whilst helping mitigate potential taxation issues and giving you the best solution to your retirement plans.
Some of the questions you may have regarding retirement planning include:
When should I start saving?
What are the implications if I delay?
Should I join my Employer's scheme?
If I have an existing pension scheme in the UK should I consider a transfer?
Am I contributing enough to fund my retirement plans?
How much am I likely to receive and do I need flexibility in my income?
Can I be more tax-efficient in my planning?
Taking the decision to retire in a foreign country also means that you have made the decision not to return to your home country, and this brings a number of challenges, but also opportunities.
Some of the options available to expats who plan to retire abroad include:
Transfer of UK pensions to a Self- Investment Pension Plan (SIPP)
Qualifying Non-UK Pensions (QNUPs)
Qualifying Recognized Overseas Pensions (QROPs)
Remaining in the existing company scheme
Regular savings plans
What is a SIPP?
A SIPP (Self-Invested Personal Pension) is a UK-government-approved personal pension scheme which allows members to choose from a wide range of investments that match the member’s individual circumstances. Therefore, a client can freely choose how their money is invested to match their risk criteria whilst also having the flexibility to take benefits to match their retirement expenditure plans.
How does a SIPP work?
With the help of a financial adviser, a SIPP allows you to decide what type of investments to invest in depending on your risk appetite and timeframe until retirement.
It is likely you would have received UK tax-relief on your contributions to UK pensions when you were a UK resident. Alternatively, you may be a member of a UK Group Scheme or a Final Salary Scheme wishing to transfer to a SIPP so that you can choose your investment strategy, or so you can decide when and how to take your benefits.
It is essential that you start to plan for your retirement as early as possible so that you are able to live comfortably in the knowledge that your lifestyle needs are covered. This will mean careful consideration of your pension fund throughout your working life.
A SIPP gives you control of your pension, whereas most members of a company pension scheme have very little control and almost no idea where their pension money is invested. Also, with many of the UK's largest companies closing their final salary schemes to all members, a lot of individuals are now having to look at taking their pensions into their own hands.
Indeed, there are many reasons why SIPPs are becoming increasingly popular. Some of the key features include:
A SIPP allows the individual along with their financial adviser to decide on the types of investment to place the pension assets into depending on their risk profile and timescale to retirement.
A wide range of investments are available including stocks and shares, unit trusts, investment trusts and OEIC's. You can sit down with your adviser to discuss your needs and what solutions are available to you. However, it’s important to explore options that diversify your portfolio whilst also offering the greatest prospect of growth for as little risk as possible.
SIPP trustee fees tend to be fairly affordable on an annual basis, sometimes as low as a few hundred pounds per year. Funds, other collectives, and shares are generally available via platforms or overseas wrappers, allowing access to a whole range of assets at lower charges than individuals can achieve.
There are a number of people who have several small pensions that they have either forgotten about or the funds are not growing as they should. The National Association of Pension Funds and the Trades Union Congress believes that an average UK person changes jobs eleven times during their career. Consolidating your pensions into one pension wrapper can make keeping track of your pension savings easier: you can keep a closer eye on the value of your savings and it could also potentially reduce the amount of management fees you are paying. It will also make things much easier when you eventually retire and want to start drawing on your pension savings.
Members of a SIPP can take income drawdown, meaning that an income can be taken from the fund (subject to certain limits) whilst leaving the remainder of the fund to grow in value. An annuity need not be purchased. The benefits taken each year can vary depending on your individual circumstances and give real flexibility to match your income requirements.
SIPP benefits in the Philippines
The UK does have a tax treaty with the Philippines and according to the treaty, a resident of the Philippines should pay income tax on a UK pension in the Philippines. The Philippines does not tax foreign pensions.
What is QROPS?
A Qualifying Recognized Overseas Pension Scheme (QROPS) is an HMRC-recognised pension transfer scheme that is based in a jurisdiction outside the UK but still keeps the same standards or equivalent as a UK pension.
The popularity of QROPS schemes has risen considerably following the introduction of new pension rules in 2006 by HMRC. If you have an existing QROPS it is important that as a resident of the Philippines that it is held in the correct jurisdiction.
Why should I choose a QROPS?
A QROPS provides you with more control over your pension fund investments.. Additionally, QROPS will also let you bestow the rest of the fund to your beneficiaries without any deduction of UK tax upon death, as long as you have spent five years or more living outside the UK.
Which is the best jurisdiction for QROPS?
The QROPS jurisdiction you choose will vary depending on your individual requirements and on where you are likely to retire - however, deVere Philippines highly recommends Malta and Gibraltar. Malta is an integral member of the EU, with a highly-regulated banking sector and a fully transparent tax system. Meanwhile, Gibraltar's links with the UK make it subject to EU rules and regulations.
Qualifying Non-UK Pension Scheme – QNUPS
Cash and assets that are non-UK tax-relieved can be contributed into a Qualifying Non-UK Pension Scheme, or QNUPS, providing significant opportunities for British domiciles, irrespective of whether they are resident in the UK or are expatriates.
A QNUPS offers an excellent vehicle to top-up the overall amount of assets that need to be set aside for a comfortable retirement. Based on your current holdings and lifestyle, an actuary will be able to establish the level of retirement benefits required to sustain your standard of living in retirement and recommend a sustainable funding level of contributions to the QNUPS.
QNUPS can offer some great benefits, especially the extraction of wealth in a tax-efficient manner which is usually the most difficult issue to solve.
The key points of a Qualifying Non-UK Pension Scheme:
Depending on your circumstances, it may be possible to contribute to a QNUPS after you have retired.
The pension fund can be used by the member during his lifetime and any remaining balance can be passed on to their chosen heirs upon the member's death free from UK death tax.
You do not need to have any earned income from employment in order to make a contribution.
There is no maximum contribution that can be made into a QNUPS.
Jurisdictions for a QNUPS
Depending on your retirement plans and location of such retirement deVere Philippines is likely to recommend either Guernsey, Malta or Gibraltar as a destination to hold your pension.
Who can benefit from a QNUPS?
A QNUPS is ideal for both UK residents and non-UK residents who wish to fund further retirement whilst also wishing to pass retirement assets on to loved ones on death. Most British citizens living overseas are still exposed to IHT, as domicile status is very difficult to lose. All British domiciles are taxed 40% IHT on their worldwide estate when they die.
With UK retirement rates being at near-record lows, even individuals who have a fully-funded UK pension in line with the current Lifetime Allowance limit (£1.05 million) can find that they do not have a large enough retirement fund to satisfy their retirement needs. A QNUPS, therefore, creates an ideal vehicle to build an individual's retirement provisions in line with their retirement income expectations.
A QNUPS is also ideal for individuals who spend large amounts of time in more than one country, as it allows them to create a fully international and passport-able retirement plan that can be contributed to and accessed irrespective of where the individual resides.
While both UK residents and expats creating a QNUPS should do so for retirement provisions, any funds that remain in the QNUPS on death do not attract a UK IHT charge and can be passed to beneficiaries of the member's choice rather than being distributed in accordance with their will.
Drawing Pension Benefits
Advice on drawing pension benefits should always be issued by a qualified professional who will review your circumstances and take into account your requirements to help you ensure that you're making the right choice.
When you are ready to take the benefits, we are here to answer the following questions:
Should I take the Pension Commencement Lump Sum (PCLS) available?
Do I buy an annuity or enter into a drawdown contract?
What are the options, such as phased retirement, that are available?
Making the most of your pension plans now could have a significant impact on your happiness in retirement; getting it right could mean a higher income, or even an earlier retirement date.
To find out more, contact deVere Philippines, part of deVere Group, for a no-obligation consultation.