A combined pension package is likely to yield greater dividends for expats - a market advisers and providers cannot afford to ignore
With all the activity surrounding the impact of A-Day on pensions, together with the spring budget in the UK and the affects this may have on trust and inheritance planning, it is important that we - advisers and product providers alike - do not ignore retirement planning for those currently resident outside the UK because this market still offers a lot of potential.
Firstly, the expatriate client should not ignore the advantages of continuing to contribute to their existing UK pension. If nothing else, they will maintain the advantage of contributing to just one pension pot, rather than the confusion and administration hassle created by holding pension plans all over the place.
And, on returning to the UK, there is tax relief on contributions to bear in mind as well. Additionally, any gains made are free of income and capital gains taxes, which also helps.
But do not forget the disadvantages that such a pension strategy can incur. Not least the fact that, other than in the case of ill health bringing on early retirement, access to funds is limited until retirement age is reached.
Plus, when the client resumes UK residency, any contributions made from that point will start to count against the lifetime allowance. And if the client places any original capital sums within the pension fund then this will also count as taxable income.
Alongside this element of retirement planning, a possible alternative is to use an offshore life policy during the time the client remains outside the UK.
Indeed, the life policy may well dovetail with the pre-existing UK pension plan. The tax treatment of offshore policies is exactly the same as that for a UK pension, after tax relief on contributions, and there is also no restriction on when benefits can be taken (unlike the UK pension, where these are primarily limited to after the retirement date).
Not forgetting the 5% tax-deferred withdrawal, which is also available at the time of the client's choosing, and other advantages such as the assignment of the policy between husband and wife, as well as the potential for sophisticated inheritance tax planning to preserve the value of the fund for future generations.
Finally, there is the ability to claim top-slicing relief, which could well allow large gains to be realised before higher rate tax becomes payable.
All in all, there is compelling evidence that when considering retirement planning for expatriate clients, the mix and blend of all the available tools is likely to yield greater dividends than simply sticking slavishly to the single, tried and tested route.
In fact, the combined approach to retirement planning is likely to be the clear way ahead for the future - using the existing pension, offshore life policies and Isas.
An individual's financial strategy after retirement is likely to be more like a series of income taps, rather than the single money hose of the past.
For example, this means when the income available from drawdown is low, that particular tap can be turned off, with the offshore bond then opened up in its place, offering the
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