I have recently moved to the UK from abroad and am unsure how long I will stay here. I am working for a public relations company and have been offered entry to its company group personal pension scheme. The employer contribution is generous at 12 per cent and I am required to pay 5 per cent. I am keen to join but want to know the implications of doing so in terms of transferring the benefits back home on my return.
Previously, it was the case that any application to transfer UK pension rights to an overseas scheme required the consent of the Pension Schemes Office.
However, PSO update 82 announced changes to this procedure with the intention of making the process simpler and moving the responsibility to the ceding scheme in terms of ensuring that the conditions specified by the PSO are met.
In simple terms, the PSO wants to facilitate transfers to appropriate overseas schemes for people moving abroad permanently but it understandably wishes to prevent any abuse of the system.
The amendments to the system of overseas transfers take effect from April 6, 2001.
Appendix 22 of IR76 (2000) sets out the criteria that must be met for transfers to take place without the prior approval of the PSO. It does not cover the transfer of contracted-out rights, which still require the approval of the National Insurance Contributions Office, so I am assuming the only contributions made are those by yourself and your employer.
For the transfer to take place, it is conditional that no benefits have come into payment from the personal pension plan and that the fund will be paid “directly from the scheme administrator of the personal pension scheme to the administrator/trustees (or the equivalent) of the overseas scheme”.
If both these conditions are not met, then no transfer can take place, even by seeking PSO approval. Indeed, it is stated that “no transfer application should be submitted to the PSO” if this is the case.
Those who are or have been controlling directors within 10 years of requesting the transfer or high earners within six years of making the transfer request will require prior PSO approval. Controlling directors are defined as those controlling 20 per cent or more of the ordinary share capital, either singly or with associates, directly or indirectly. High earners are defined as having net relevant earnings in any of the six years prior to transfer request exceeding the allowable maximum for the year of assessment in which the transfer payment is requested, that is, £91,800 in 2000/01.
Assuming that neither of these categories applies to yourself, then, as long as you fulfil the following criteria, a transfer can be made overseas on your return back home:
You must have left the UK on a permanent basis with no intention of returning at a later date to work or retire. This will need to be confirmed by you in writing.
You must be in employment or self-employment back home. A letter from your new employer will be required or a copy contract or invoice if self-employed.
Your employment in the UK must be totally severed and you must not “exercise any self-employment in the UK”. Again, written confirmation from yourself will be required together with your P45 from your UK employer.
Both yourself and the scheme to which you are applying to transfer must be resident and established in the same overseas country. This will need to be confirmed in writing by yourself and the scheme to which you wish to transfer.
The scheme to which you wish to transfer must be authorised by the appropriate body. Confirmation of this will be required from the authorising body.
The scheme must be capable and willing to accept the transfer payment. Written confirmation is needed from the receiving scheme.
Full details can be found in appendix 22 of IR76 (2000), as can details of the evidence that will need to be submitted if these criteria cannot be met in full and approval from the PSO is required.
It is unlikely with the advent of stakeholder pensions that there will be any penalties on stopping or transferring benefits. However, given that the onus has moved from the PSO to the provider in conducting and checking the transfer, this will obviously have cost implications for the pension company. So I would suggest you seek clarification on whether any charge would be levied for its services in this respect.