Expats need to watch out for wrong advice about transferring their UK pension funds into a Qualifying Recognised Overseas Pension Scheme (QROPS).
QROPS are specialist overseas pension funds that can have tax and investment advantages for anyone with a UK pension who now lives permanently overseas.
But there are some restrictions on the type of retirement savings that can go into a QROPS.
Top of the list are public funded pensions – this includes the state pension, public sector pensions and civil service retirement plans.
These are all funded by The Treasury mainly from revenue cash flow rather than invested funds.
The government has never allowed state pension transfers and last year barred public and civil service transfers as well.
These schemes cover teachers, emergency service workers, anyone with an armed forces pensions and civil servants.
Final salary pension transfer to QROPS
Next come the grey area of final salary pensions. These are not barred from transfer to a QROPS, but in most cases, switching the money from one of these pensions to a QROPS is likely to result in reducing the benefits.
Under the circumstances, most IFAs not recommend a transfer unless you have strong personal reasons for switching.
So what funds can you transfer?
Any direct contribution pension is OK – that’s retirement savings with a pay-out generally linked to the performance of stock exchanges.
These include personal pensions, workplace pensions and SIPPs.
Pension provider offered misleading QROPS advice
Make sure the QROPS advisor is qualified and licensed to talk about transferring a pension out of the UK.
One 60-year-old in Canada recently complained to The Telegraph that his pension provider had wrongly told him that he could not transfer his UK SIPP to a QROPS.
Canada QROPS do come with a catch. They can make payments to under 55s to buy a home, which is not allowed under UK pension rules.
But just because the retirement saver lives in Canada does not mean that the money cannot go to another offshore financial centre and pay a member living in Canada.
QROPS can get complicated. The rules in the UK, where you live and where the QROPS is based all have to align and that’s why asking a pension provider or non-specialist adviser can lead to receiving the wrong information and a possible loss of benefits.