Over the past two years, there have been some changes to UK pension legislation that affect many expats. These do not relate to the UK government state pension for citizens, but rather to the private pensions of anyone who has worked in the UK.
Only 13 per cent of UK expats intend to retire in the UK, and 5 per cent of all surveyed plan to spend the retirement in Thailand, according to a recent study by Alliance & Leicester International.
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5% of UK expats names Thailand as retirement destination
In the report obtained by The Nation, 400,000, UK expats are voting with their feet and choosing to retire abroad according to findings from Alliance & Leicester International (ALIL). France (18 per cent) is the most popular retirement destination for expats followed by Spain (13 per cent) and then the UK (12 per cent).
However, while 88 per cent of expats intend to retire abroad, access to UK based family and friends still appears to be important with 57 per cent intending to retire in Europe. Indeed, 10 per cent of expats cited being away from family and friends as a major barrier to retiring outside the UK.
Further afield, Thailand (5 per cent), the US (4 per cent) and New Zealand (3 per cent) are all potential retiree destinations. Expats intend to fund their new lives in the sun through a variety of methods including savings (27 per cent), UK State Pension (23 per cent) and private pensions (20 per cent). Property is a big source of retirement funding for expats with 6 per cent relying on rental income, 6 per cent intending to sell a residential investment and 2 per cent planning to take out an equity release plan.
Since Pension A Day, if you leave the UK, you may transfer your deferred UK pension offshore.
You need to meet certain criteria, the first being that you do not intend to move back to the UK in the foreseeable future. If the transfer value of the pension in the UK is less than 1% of the lifetime allowance, you may actually claim a full refund of the value once you reach the minimum retirement age of the scheme or 55.
The current lifetime allowance is 1.8 million (87.85 million baht) but is being reduced to 1.5 million at the start of the next UK tax year, on April 6. So, if your transfer is currently, say, 16,500, it is below the current lifetime allowance of 1.8 million and you may reclaim your pension pot as a full refund under what is called the “triviality rule”. Effective from April 6, the value would need to be less than 15,000 for you to claim a triviality refund. If you are uncertain about this, I suggest you seek professional help.
Many readers have asked me what the lifetime allowance means. In simple terms, it is the amount that you can contribute into your pension scheme and get maximum tax breaks. If your total pension pot exceeds the lifetime allowance, you would pay tax on the excess when you retire. If you were to withdraw this at retirement, this would be at the rate of 55% of a lump sum. If not, 25% tax would be payable on the excess prior to the investment going into the generation of a pension income for you. The specific rules on lifetime allowances are a little more complex than this but affect very few people. If you think you have a pension pot in excess of the lifetime allowance, you ought to be seeking professional advice on what to do about this.
Infrastructure services, if quickly improved, could promote a better investment climate in Thailand
Economists and analysts forecast gloomier times, predicting Thailand’s GDP to contract by 0-3 percent while the country descends into a deflationary spiral. Moody’s Economy.com says Thailand could be the Asian economy that suffers the most from the global financial crisis. Plus the spectre of further political unrest remains on the horizon. However, there are some signs that Thailand can ride out the economic firestorm. Government debt-to-GDP remains below average regionally speaking, the financial sector learnt from the 1997 meltdown and remains relatively well capitalised and liquid, and Board of Investment privileges are some of the best in Southeast Asia.
Thailand continues to reduce import tariff rates for various products.
Many of these tax privileges were scheduled to expire at the end of this year, but now extended for another one to three years, depending on whether such tools and equipment can be currently locally produced. The government also cancels many parts and components required in assembling chasses used in vehicles that are fueled entirely by natural gas.
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Pension particulars: what changes to legislation mean for UK expats
