As former pensions minister Baroness Altmann revealed last year that she is cashing in her Final Salary Pension, is it time for expats around the world to think about a transfer overseas?
And with more and more U.K. companies reporting growing liabilities within their Defined-Benefit / Final Salary Pension Schemes, cash-equivalent transfer values have soared as schemes look to offload liabilities. With some pension schemes offering transfer values of 40 times their projected annual pension income, that presents expats who are members of final salary schemes with some interesting options. Transfer values increased by around 20% in 2016, following falls in gilt-yields, which added to pressure on schemes to reduce their deficits. A 60-year-old man with a final salary pension of £10,000 a year could expect an average transfer value of just over £220,000 at the end of 2016, an increase of more than £25,000 compared to a year earlier.
So what about that transfer overseas?
A Qualifying Recognised Overseas Pension Scheme, or QROPS, is an overseas pension scheme that meets certain requirements set by Her Majesty’s Revenue and Customs (HMRC). It enables UK pension holders to transfer their UK pension and protect against various scenarios, such as currency fluctuations, changes in UK legislation, and the looming possibility of their scheme going bust, such as BHS, Woolworths and Monarch Airlines, to name but a few.
With over 100,000 members transferring over £8.8bn of assets to QROPS schemes around the world since their inception in 2006, increasing numbers of expats are looking at the possibility of that move abroad, in more ways than one.
