Pensions for British Expatriates in Singapore

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Pensions for British Expatriates in Singapore

Previously the options open to UK expatriates were limited. However, the introduction of "A Day" in the UK (6 April 2006) represented the biggest change in UK pensions history for many years. A Day brought with it two major changes

Continuing with UK Pension Contributions

Prior to A Day there existed a "concurrency" test which prevented investors from being active members of two pension schemes at the same time (such as an Occupational Pension scheme and a Personal Pension Plan). This was removed in April 2006 which meant that a UK citizen was able to join as many pension schemes at the same time as they wished.

There were also changes to contribution levels:

1. Maximum contributions into pensions overall is the higher of £3,600 per annum or 100 percent of earnings (subject to the current maximum of £235,000 for tax year 2008/2009).
2. The maximum will rise to £255,000 by the year 2010/2011.
3. A Day also introduced the Statutory Lifetime Allowance (SLA) which is the maximum amount of pension funds an individual can hold without being subject to tax penalties. The maximum for the current tax year is a £1.65m.

Provided the limits above are not breached individuals can obtain tax relief on contributions as before. At retirement 25 percent of the fund can be withdrawn tax-free as before. A Day also increased the earliest retirement date in the UK from 50 to 55 years of age from 6 April 2010. It is also now possible to continue in income drawdown after age 75 albeit in a restricted form.

For the British expatriate if earnings continue to be subject to UK income tax then pension contributions can obtain full tax relief at the highest marginal rate. Otherwise, if there are no UK taxable earnings, pension contributions can still be made without the benefit of tax relief at source. For certain occupations such as Crown servants serving aboard, if salaries remain subject to UK, income tax pension contributions can continue.

Otherwise, for the British expatriate who no longer has UK "pensionable earnings" it may be possible to continue pension contributions of £3,600 per annum gross after leaving the UK but a personal pension/stakeholder pension plan must already be in existence and five years may be the maximum length of time.

Individual circumstances may apply and for clarity it's recommended to seek professional advice.

Frozen Pensions

Although there are limitations on making additional tax efficient UK pension payments for the British expatriate, A Day also introduced QROPS (Qualifying Recognised Overseas Pension Schemes) and anyone with a frozen UK pension can now consider the options available.

This is a complex subject but in summary:

• QROPS  enables UK pensions to be transferred overseas without UK tax penalties
• Stemmed from an EU directive to encourage a free flow of capital on a global basis
• QROPS can provide a lump sum of up to 30 percent with an ongoing income typically provided by way of "Income Drawdown"
• QROPS pension income is free from UK Income Tax at source
• Tax efficient global jurisdictions ensure local tax efficiency
• The fund of money can be invested into almost any recognised investment.

Whilst QROPS presents an exciting opportunity, like any new legislation, it is open to misinterpretation and abuse and HM Revenue & Customs do review and adjust the rules.

Before considering any pension transfer professional advice should be sought to ensure that the opportunities are maximized through the most appropriate means, and in particular any potential disadvantages and pitfalls have been highlighted.

Information supplied by Aidan Bailey, The Fry Group
Web: www.thefrygroup.co.uk / Tel: 6225 0825 / Fax: 6225 4679  / e-mail
Copyright © 2008 The Fry Group All Rights Reserved