Pension changes hidden in the Budget

beboldCurrent affairs, Pensions, Policy

UK biometric passport

One or two notable exceptions for self-employed people aside, this week’s Budget from the Chancellor of the Exchequer has been widely viewed as something of a non-event for most people.

However there is usually something worthy of note tucked away in the detail, even if the Chancellor doesn’t make it part of his speech…

UK biometric passport - pension changes announced for moving funds abroadThis time around there were a couple of points which caught our collective eyes at Robert Nicholas Financial Advisers, in both cases around pension changes.

The first thing we learned from the Budget’s supporting paperwork was that the Government expects to report on its review of the state pension age by May 7th this year. The review was announced back in the spring of 2016, but we hadn’t until now been told when to expect the results.

That’s something we will be keeping a close eye on, though you can expect the state pension age can only go one way now – up!

Also quietly contained in the detail of this, the final Spring Budget, was a new charge on moving pensions abroad. Until now (and since 2006) funds could be moved into Qualifying Overseas Pensions (QROPS) without a tax charge, but from today that all changed.

Now, apart from in some specific circumstances, the Government will expect to take a 25 per cent cut of the pot. In addition payments made from those transferred funds would be subject to UK tax rules for the first five years. Here’s the Government page with all of the information.

Surprise for the pensions sector

The pensions industry was collectively taken somewhat by surprise by this announcement and is still working out all of the consequences, so that people can continue to be properly and reliably advised. However, what seems clear is that if the funds are moved to a qualifying scheme in another European Economic Area country and the individual benefitting from them is also in the EEA, or both the person and the funds are outside the EEA when the transfer occurs, they will not attract the tax.

Hopefully this should avoid penalising people who are legitimately moving their pension abroad because they are relocating their lives outside of the UK. At the same time, it should prevent people from abusing the system by moving pensions away for any advantage while they remain resident in the UK.

If you think any of the issues raised here could affect you, please don’t hesitate to get in touch with us for guidance and more information. If you are hoping to retire abroad and take your pension pot with you, it will be crucial to make sure you do everything properly.