New UK Pension Laws

New UK Pension Laws

The Taxman is closely watching your UK pension, no matter where you live!

With the new pension reforms in place as from April this year, many believe that the pension landscape is becoming a free for all. There are many drawbacks to go with the new advantages.

Whilst you can now access your pension earlier, taking out funds from your pension can still land you with a hefty tax bill even if you don’t live in the UK.

As things stand, it is possible to withdraw up to 25% of your pension pot in a tax-free lump sum. But this is where it gets tricky. Any income you draw over and above the 25% will be taxed. You could be liable to pay as much as 40% or more on lump sums. Should the amount exceed £100,000, you will start to lose your personal allowance and face even higher taxes.

One advantage of withdrawing a lump sum is that you can easily pass your pension pot on to your dependants and it will be tax free as long as your death occurs before the age of 75. But over the age of 75, your dependants will have to pay a hefty 45% tax should they want your pension as a lump sum. If, on the other hand, they want to draw an income from it, they will still be taxed, but at their marginal rate. The whole thing is a minefield of complications and tax tables.

It is not all doom and gloom, but there are definite concerns and pitfalls to avoid. Many in the pension industry still fear that the loosening of the pension laws will lead to more people running out of money in their retirement years.

The question you really need to ask yourself is: “What is the best and most tax efficient course of action to protect my hard earned retirement income?” There are many options available to you as a British Expat that you may not be aware of.

If you would like to know more, please send any questions and concerns you have to Teresa Lane at info@laneandassociates.co.uk, or phone + 56 9 9 716-5651. This pension advice service is offered free of charge to all British Commonwealth Society Members.

Teresa Lane