As the 2019 Brexit deadline looms ever closer, the discussion becomes even more poignant and especially so when you consider that without expert, technical financial advice, it is estimated individuals considering global migration and the associated transfer of their wealth overseas may face tax liabilities and charges of up to 55 per cent on their total pension asset value.
Key points
- The DWP recently announced that overseas pension transfers will require financial advice.
- Cross border transfers can be extremely complex.
- The announcement will hopefully block scammers from targeting individuals who want to make the transfer.
Advising on overseas pension transfers from the UK must therefore incorporate a holistic approach to consider all aspects of a client’s financial, visa and tax situation and any future migration plans, including a potential return to the UK and departing country tax and other consequences. Ignorance about this can cost a client hugely in their future decumulation years and a legal claim for wrong advice may surely follow.
As it stands, there are currently at least six categories individuals may fall into that could subsequently impact their actual or potential beneficiary status, regardless of the type of UK pension they may hold.
Those six, often unbeknown, categories include:
• UK nationals or citizens of other countries planning one day to live ex-UK;
• UK nationals or citizens of other countries planning to leave the UK imminently;
• UK nationals or citizens of other countries who have already left the UK, permanently or temporarily;
• UK nationals or citizens of other countries planning one day to move to the UK and either have or are about to have some form of UK pension;
• UK nationals or citizens of other countries planning to move to the UK imminently and either have or are about to have some form of UK pension and other assets; and
• UK nationals or citizens of other countries who have already moved to the UK either permanently or temporarily and either have or are about to have some form of UK pension.
It is plain to see that this is not about fait accompli pension transfer implementation. There are also other non-pension assets involved which are rarely considered. Quality advice must remain focused on tailored solutions for an individual’s requirements and situation that may or may not lead to a pension transfer, rather than the damaging practice by some advisers to immediately recommend transfers or be incentivised to sell products.
Best solutions
Clearly, more needs to be done beyond the DWP’s intentions to ensure individuals are recommended the best solutions based on their unique situation or geographical location, rather than a mandatory advice requirement for overseas transfers.
