Income Tax For Dummies

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UK Pension Transfers Guide For Dummies

Well over 2 million British people currently live overseas, even more are joining them since the new higher tax rate bands were introduced. Most have built up sizable pots of cash held within UK pension schemes. There are millions of others that have worked within the UK and had to invest in UK pension schemes. All these people were inhibited on what they could invest in and on how to move cash out. These pension pots are frozen, unlikely to perform as well as free market schemes.

Typically the pension funds use a very limited range of funds, this is due primarily to the UK government imposing strict rules on where this pension cash can go, no matter what age the person in the scheme it is only possible to invest in equities, certain property, gilts and cash- As a consequence when the equity markets dive, or property values fall then the pension pot also falls, not exactly the best way forward in these volatile times.

Since there were tax incentives to invest in UK pensions the government insists this pension pot is used to purchase an annuity- in effect a monthly income of a set amount for a specific time frame, all based on your age and morbidity tables, should the pensioner die mid stream any balance is then lost to either the government or the scheme provider Not any more, in April 2006 Freedom in the form of new QROPS legislation:, this article confines itself to the benefits, not the actual document which is frankly long winded and hard to grasp.

There are several benefits in transferring your existing frozen pensions to a new International SIPPS or QROPS. Assets are held under a Pension trust and all the assets whilst in the new pension are free of income tax, capital gains tax, wealth tax (IHT) and can be passed onto successors free of any tax including Inheritance tax. You have access to a full spectrum of investment opportunities, all tailored to your risk appetite. These can include equities, property, bonds, fixed deposit, commodities and alternative investments all of which can be managed by investment specialists. You can place monies into cash accounts to meet liquidity requirements or a very low risk investment profile. As your life circumstances change it is a simple matter to switch between investment strategies. Income and capital gains arising from the investments held within the Plan, or benefits paid by the Plan, are not subject to UK tax.

In addition, tax authorities internationally, including Spain, treat Retirement Schemes and annuity income derived from them favourably with typically only the income element of annuity payments attracting income tax. In most cases this reduces significantly the amount of tax on income. The schemes can provide a regular income that can enhance your personal cash flow requirements.

In addition early lump sum capital payments (25% at age 55) can assist in a variety of scenarios from paying off a mortgage to purchasing a major asset.The schemes meet the different requirements of pension legislation in many countries from around the world. This means they will not become obsolete should you move between jurisdictions, and you will not face the hassle of moving assets between providers in order to ensure savings remain tax efficient. The schemes are usually domiciled in The Channel Islands a very favourable jurisdiction both from a political and tax perspective.

For more pensions advice resources, visit our IFA Middlesex website or some of these great sites below;

Financial Planning For the Elderly

Mortgage Advice Middlesex - The No.1 Guide to Finance Directions




IFA Middlesex
Burma House, Station Path, Staines, Middlesex TW18 4LA, United Kingdom

About the Author

<a href="http://www.ifamiddlesex.com/pensions-advice-middlesex/">Pensions Advice Middlesex</a>

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