I am a former UK resident, having now moved abroad. I have substantial pension rights earned in the UK but have no intention of returning to the UK in the future. Would it be possible for me to transfer these benefits into my new employer's scheme?
Your question really falls into two parts. First, can I transfer abroad and, second, should I transfer abroad?
The answer to the first question will depend on a number of different factors. Thankfully, this is an area which has very recently been streamlined by the Pension Schemes Office in recognition of the labour-intensive requirements of the old regime. One of the requirements was that a copy of the overseas scheme rules were provided to the PSO before it could agree to the transfer.
PSO Update No 82 details fully the workings of the new regime. It states that, in the majority of transfer cases, PSO approval will no longer be necessary. Therefore, there will be no need for the overseas scheme to provide a copy of its rules, which was often a stumbling block in organising a transfer.
As long as you were neither a controlling director nor a high earner – that is, had earnings in excess of the earnings cap – in relation to the UK scheme, there will be no need for you to submit an application to the PSO prior to the transfer.
You will need to contact your UK pension scheme administrators asking if they would be happy to make a payment to an overseas scheme. Generally speaking, as long as the rules of the UK scheme permit transfers to overseas arrangements, there is no reason why they should have any objections to making such a payment.
Of course, your current employer's scheme will need to be capable of receiving such a transfer payment and this is obviously an issue which you will need to raise with them before taking matters further. Practice varies from country to country and it would be best to obtain their agreement first in writing. Other requirements before a transfer can take place are as follows:
Pension benefits must not have commenced under the UK scheme.
The transfer value will be subject to the normal limit regarding transfers from UK schemes. Specifically, it should not exceed the present value of the Inland Revenue maximum benefits under that scheme.
You must have left the UK with no intention to move back.
You must be employed abroad with an employer's pension scheme.
You must not have any employment arrangements within the UK, be it employed or self-employed.
The list is not exhaustive but covers most of the main points the PSO would need to have in place before the transfer can proceed. The UK scheme administrators will be extremely wary about releasing a transfer payment without assurances from you that all the above apply.
The PSO will apply random checks on cases. If this case is reviewed and it appears that the administrators did not obtain adequate proof of your situation, there is a risk the UK scheme will lose its exempt approved status. This will be of an enormous significance – particularly for big company schemes – and therefore the administrators will take extreme care in assessing the transfer.
As long as you can provide adequate documentation supporting the above points, the administrators of your existing scheme should be helpful.
On the question of whether you should transfer, this is considerably more complicated. A transfer overseas will almost certainly involve a fundamental change in the format of your pension scheme. For example, your UK benefits may be defined in relation to your salary and service with that employer, that is, in a final-salary arrangement. Such schemes are rare abroad and they are more likely to be set up on a money-purchase basis where you have a pool of money and your future pension will depend on investment returns and annuity rates.
You will be best advised to have a comprehensive assessment of the advantages and disadvantages of each route prior to your decision. This would normally concentrate on the investment growth required in the overseas scheme in order to provide similar benefits.
To further complicate matters, the format of benefits when drawn under the overseas scheme may differ greatly from those of the UK scheme. For example, the over-
seas scheme may not permit a tax-free lump sum or alternatively allow a far greater tax-free lump sum than the UK scheme making a comparison more difficult. There may also be a differing tax treatment between the two incomes.
Overall, this is a particularly complicated situation where you would be best advised to take advice from someone with specific experience in this area.