Looking For A Retirement Planning Service To Help Choose The Right Pension Option To Suit Your Lifestyle Expectations?
Lawson's Equity provide a first rate retirement planning service. The following information lays out what options are available to you and further down, you have an option to book a free, no obligation introductory consultation call with us today.
Lawsons Equity Limited is a European-based financial services company providing authorised and regulated advice to clients and their families who may be looking for bespoke solutions in relation to QROPS (avoiding annuity investments), pension plans, investments and other investment advisory services. We are regulated by Europe's leading financial authority, the MFSA (Malta Financial Services Authority) to serve clients based in UK, Malta, Italy, Spain & Portugal. To view our full credentials and qualifications, please see our about section.
FIRST OF ALL, WHAT IS A PENSION?
A pension (or Retirement Plan) is a long term savings scheme where you contribute on a regular basis to a pension fund in order to provide you with an income when you retire and are no longer earning an income from paid employment.
Depending on where you are resident there may be tax advantages of contributing to a pension fund, such as:
- Tax relief on your contributions to the pension fund
- The income and gains within the fund may not attract income or capital gains tax
- You can take a tax free “lump sum” from the fund when you retire of up to 25% depending on your residence and tax circumstances
The age at which you may start to draw an income from your pension will vary depending on the country in which you live and/or where the pension fund is administered.
There may also be an upper age limit from which you must start to draw a pension from the fund.
WHY DO I NEED A PENSION?
Though not compulsory in many countries it’s a good idea to think about having a pension fund, especially if you don’t have a large amount of capital or any other source of income when you retire.
Life expectancy is increasing and you may have many years of retirement for which you will need to support yourself and your family, and how will you do that if you don’t have income from employment?
In addition to paying for your basic living costs you may have a lot spare time to pursue hobbies or interests or to travel and having enough money to do these things can be important to your quality of life.
You will usually qualify for some form of state pension which may cover your basic expenses, but even the maximum payable is not likely to be enough to comfortably retire on.
The earlier you start contributing to a pension fund the greater likelihood that you will at least have some additional income with which to enjoy your retirement.
TYPES OF PENSION SCHEMES
There are three basic types of pension that are available:
1. State Pensions, paid by the Government
The amount you will receive depends on the number of years you have made National Insurance/Social Security contributions (or equivalent) and in some cases your earnings. National Insurance/Social Security contributions you pay while working pay for the pensions being claimed now, not towards your own pension.
2. Company or occupational pensions, offered by employers
Your employer may ask whether you wish to join the company pension scheme when you join and though it is not compulsory this is in many cases a good way to save for retirement as both you and your employer can contribute to the scheme.
There are essentially two types of company or occupational scheme, Defined Benefits (also known as Final Salary) and Defined Contributions (also known as Money Purchase).
If you are lucky enough to have a Defined Benefits pension then you are guaranteed a fixed income on retirement based on your length of service with the company and your final salary on retirement.
If you have a Defined Contribution pension this will be based on the value of the contributions made by the employer and you at the time of your retirement and the income that can be generated from pension pot that has been built up.
Many companies no longer offer Defined Benefit pensions.
3. Personal or private pensions, set up by you
If you do not have an employer scheme, are self-employed, or want to increase your income at retirement over and above your employers’ scheme then a personal pension can be a good idea. Personal pensions or private pensions can be set up by you or with the aid of your Financial Adviser.
These type of pension plans are offered by Insurance Companies, Banks and specialist pension administration companies. All personal or private pensions are Defined Contribution and the pension you will receive on retirement will depend entirely on what you contribute to the pension (including any tax relief on contributions) and how well the investments have performed.
You can contribute as much or as little as you want to a personal or private pension though tax relief is only available up to certain limits.
There are a number of different personal or private pensions schemes available and in general they offer greater flexibility of investment than Occupational pensions enabling you to invest in line with your expectations on retirement.
You may also be able to take your pension earlier from a personal or private pension than you would from either the State or an Occupational pension.
THERE IS A FOURTH OPTION FOR EXPATS
Finally, there is a fourth option that is potentially available particularly to British Expats and also possibly Maltese Nationals who have worked in the UK in the past and paid into or received from their employer some form of pension provision.
QROPS (Qualifying Recognised Overseas Pension Scheme)
In April 2006, in response to a directive from the European Union, Her Majesty´s Revenue & Customs (HMRC), initiated a new scheme, which allows anybody who has paid into a UK pension, and who is no longer a UK tax resident or shows the intent to relocate to another country, to take control of their pensions, by transferring their funds into a QROPS (Qualifying Recognised Overseas Pension Scheme.
This means that anybody who has paid into a private, occupational, or Superannuation pension scheme, or has opted / contracted out of SERPS (State Earning Related Pension Scheme - the government 2nd state pension) and or their UK employers paid into a scheme on the individuals behalf, can now take complete control of their pension contributions, and transfer their funds out of the restrictive tax & payment conditions currently in force in the UK.
In summary the benefits you may receive by transferring your UK pension or pensions are:
Be able to take up to 30% of the value of your UK pension subject to the period of time you have been outside of the UK and use the cash for any purpose.
• Your UK pension fund or funds can grow within a tax efficient environment.
• Your whole value of your pension funds can be passed on to your heirs without the need for probate.
• You can centralize a number of UK pensions into one easy to use structure.
• You can take control of how your pension funds are invested.
• Opportunity to pay considerably less tax on your pension income, 2.5% in certain jurisdictions.
• You can avoid adverse exchange rate movements from reducing the value of your pension.
• You can drawdown your pension in the same currency as your country of residence.
The information about QROPS is being provided for information purposes only and does not constitute tax advice. It is highly recommended that you seek independent and professional tax advice. Also Her Majesty’s Revenue and Customs has not endorsed the above information or any scheme.
Ready to find out more about QROPS?
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KIND WORDS FROM OUR CLIENTS
"Just a short note to say thank you for your kind attention and advice.
Your professional, yet friendly approach with simple explanations of the products available together with the benefits and risks and detailing the various processes, potential charges, fees etc. greatly assisted our decision regarding the suitability of the product for our circumstances.
The follow up you then provided in assisting with establishing other necessary contacts e.g.lawyers and your continuing availability for consultation, enabled us to achieve a satisfactory conclusion. "
"Lawsons Equity were able to firstly find out the exact value of my UK pension which I must admit I had almost forgotten about and then helped me to take a lump sum from it earlier than I expected which I was very grateful for and helped me to restart with my business here in Malta"
"I have been worried about my UK pension for some time because the value of it seemed to be going down and down and it was extremely difficult when attempting to contact the correct department and transferred from one to another. Lawsons were able to make contact and apply for a transfer which means I can have an input over where it will now be invested and avoid many telephone calls to the UK"
"I was impressed with the continual communication with Lawsons from the outset. My questions were always answered in a prompt manner and I found them to be extremely efficient throughout my transfer"
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