In the last article, I outlined how anyone can now contribute to a UK pension fund regardless of whe...
In the last article, I outlined how anyone can now contribute to a UK pension fund regardless of whether they are UK resident or not, whether or not they have earnings in the UK, and regardless of how long they have been non-UK resident. This article considers some issues for clients to consider before doing this.
The changes mean that, if you have a client who has moved abroad, they can continue to save in their home pension scheme. There are several advantages with this, including the convenience of only having one savings plan, and the ability to get tax relief on their contributions when they resume UK residence.
But is a UK pension the best place to direct disposable income when non-UK resident? In return for tax relief on contributions, individuals have to pay the price of certain restrictions, including the inability to access the fund until (after the changes) age 55, and, after age 75, they will not be able to leave the remaining fund to their family.
Also, when you put money into a pension, your original capital can be turned into taxable income on retirement. This is because the tax free lump sum on a pension is limited to 25% of the fund, so the fund would have to grow by 400% before an individual gets their original capital back tax free.
If someone is receiving tax relief at, say 40%, then these restrictions are possibly worth it. However, is it worth it in the case of an expatriate who has no UK earnings?
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