ISA or Pension scheme?

whambamboo

dunstonh wrote:

Your post is a disgrace and I suggest you retract it as it is totally inappropriate. Most of it doesnt make any sense and I cannot see what drink and smoking has to do with it.

I fail to see why you have responded in that manner to a perfectly decent answer.

He seems to think he can't claim the pension because he won't be in the UK. Is this wrong?

jem16

Bisoy wrote:

When you say, " withdraw 10% of your earnings and set fire to it" -if you are referring to those people in this country who go for binge drinking, smoke and shop to death without knowing their bank balance then you've got your message heard.

I think he's referring to the fact that the NHS pays a contribution of 14% on top of your 6%. So basically by not joining the NHS scheme you are giving up this 14% - nothing to do with smoking or drinking.

As to not being able to claim your pension if you are not in the UK, I don't know the answer to that. However there seems to be many British patriots living abroad and drawing UK pensions so it may well be possible.

dunstonh

Copy and paste of our research bulletin on this subject:

This bulletin will look at the aspects of taking pension benefits abroad for those clients that wish to retire in the sun, including the issues surrounding private pensions and the state pension. However, please note that this is regarding the current rules, as we will be issuing a separate A-Day bulletin on the new rules applying post 6th April 2006.

Options

There are many options for a client who intends to live abroad and receive pension benefits, including:

• Leave the pensions here and have them paid abroad (there may be issues with getting the monies paid directly and with currency conversion)
• Transfer to a pension scheme in the country where they will be living
• Leave the pensions here for now and transfer closer to retirement
• Transfer to other UK pensions

Clearly, once the pension is transferred to the pension scheme abroad, benefits will be paid in accordance with local laws and rules in that country. We would always recommend that the client seek advice from an accountancy/tax-planning firm that has connections in the country concerned regarding taxation issues and a financial adviser in the country regarding product issues.

There are four reciprocal agreements in place for private pensions such as Personal Pension Plans and Occupational Pension Schemes with the Isle of Man, Guernsey, Jersey and the Republic of Ireland. These agreements tend to have less onerous requirements to transfer their pension benefits abroad. However, generally they require the individual to have permanently left the UK and have taken up employment/self-employment in the country concerned.

Occupational Pension Schemes (OPSs)

The rules for transfers to overseas pension schemes from OPSs are as follows:

• Pension must not have come into payment (apart from income drawdown of AVCs).
• There must be no outstanding loans from the scheme to a sponsoring or associated employer.
• The scheme member must have left the UK permanently and ceased all employment and self-employment in the UK (including working for an overseas branch or representative office of a UK tax resident employer), with no intention of returning - evidenced by written confirmation from the member and payroll record of UK employer.
• The member must be in self-employment or employment in the country of the new pension arrangement (this condition is not met if the member is working for an overseas branch or representative office of a UK tax resident employer) - evidenced by a letter from the overseas employer or, if self-employed, a copy contract for services.
• The scheme member receiving the pension and the trustees must be all based in the same territory - evidenced by written conformation from member and from administrator of overseas scheme.
• The receiving pension scheme must be authorised or recognised as a pension scheme by the relevant tax or supervisory authority in its country - evidenced by a copy of the authorisation letter or a letter from the relevant body confirming authorisation.
• It must be capable of receiving the transfer - evidenced by written conformation from the administrator of overseas scheme.
  

If the plan member is a regulated individual (controlling director or high earner), HMRC must approve the transfer. In this case, HMRC will require the following additional information:


About the plan member

• His name and National Insurance Number, and the last tax district and reference number applicable to him.
• Details of any other pension benefits that are aggregable.
• A certificate (or letter on headed paper) from the tax authorities of the overseas country stating that the plan member is resident there for the purposes of income tax, or proof of the granting to the plan member of permanent resident status in the overseas country.
  

About the transfer value

• The amount of the transfer value from the transferring scheme.
• Actuarial confirmation that the transfer value does not exceed the amount required to provide maximum approvable benefits.
• Full details of any part of the proposed transfer payment which is not in the form of cash.
  

Please note that the DWP has its own rules if there are contracted-out benefits but these largely mirror HMRC’s requirements.

Personal Pension Plans (PPPs)

The rules for transferring PPPs are virtually identical to those for OPSs, as per the following:

Protected Rights and Safeguarded Rights
The transfer of protected rights and safeguarded rights is not subject to HMRC requirements because DWP regulations apply instead. Therefore, the transferring scheme’s trustees and administrator are responsible for ensuring that the transfer of those rights complies with the requirements of the DWP regulations. However, the DWP’s requirements largely mirror those of HMRC.

Non-protected Rights

• PPP must not have come into payment.
• Plan member must have permanently emigrated, with no intention of returning to the UK to work or retire. This must be confirmed in writing by the member.
• Plan member must be in employment or self-employment in the country where benefits will be taken. (This condition is not met if the member is working for an overseas branch or representative office of a UK tax resident employer). A letter from the overseas employer evidences this (or if self-employed a copy contract for services rendered or a copy of an invoice of services or goods provided).
• Plan member must have ceased all employment and self-employment in the UK. Evidenced by written confirmation from the plan member that he holds no current employment, either in the UK or overseas with a UK tax resident employer, that he holds no current employment with the UK branch or representative office of an overseas employer, and that he does not exercise any self-employment in the UK. Also required, for an employee, is the plan member’s P45 or payroll records or a letter from the plan member’s last UK employer or, for the self-employed, a copy of the cessation accounts of the transferee’s business.
• The plan member, receiving pension and trustee must be all based in the country where benefits will be taken. This is evidenced by written confirmation of residence from the plan member, and written confirmation of the country of establishment of the overseas scheme from its administrator (or equivalent).
• The receiving pension scheme must be authorised or recognised as a pension scheme by the relevant tax or supervisory authority in the relevant country. This is evidenced by a copy of the letter issued by the relevant authority (either the overseas scheme’s letter of authority/recognition or a letter from the authority providing confirmation of authorisation/recognition).
• The receiving pension scheme must be capable of accepting the transfer. Evidenced by written confirmation from the overseas scheme administrator (or equivalent).

If the plan member is a regulated individual (controlling director or high earner), HMRC must approve the transfer. In this case, it will require the following additional information:

About the plan member

• His name and National Insurance Number, and the last tax district and reference number applicable to him.
• A certificate (or letter on headed paper) from the tax authorities of the overseas country stating that the plan member is resident there for the purposes of income tax, or proof of the granting to the plan member of permanent resident status in the overseas country.

About the transfer value

• The amount of the transfer value from the transferring scheme.
• Full details of any part of the proposed transfer payment that is not in the form of cash.
  

State Pension

With regards to the basic state pension, you can retire and move anywhere in the world and be able to claim your basic state pension. There is a catch though. Your pension will not be entitled to any annual increases unless there is a reciprocal agreement in place between the UK and the country concerned that states otherwise or you reside in another European Economic Area (EEA) state or Switzerland.

Listed below are the EEA states and countries where the UK has full social security agreements in place. Regarding the latter, as each agreement is unique, you should double check the agreement that is in place.

EEA Member States
Austria; Belgium; Cyprus; Czech Republic; Denmark; Estonia; Finland; France; Germany; Greece; Hungary; Iceland; Ireland; Italy; Latvia, Liechtenstein; Lithuania; Luxembourg; Malta; Netherlands; Norway; Poland; Portugal; Slovakia; Slovenia; Spain; Sweden.

Commonwealth Countries
Alderney; Barbados; Bermuda; Canada; Gibraltar; Guernsey; Isle of Man; Jamaica; Jersey; Mauritius; New Zealand and Sark.

Others
Israel; Philippines; Switzerland (subscribes to EEA social legislation); Turkey; the United States of America; and the countries that formed the former Yugoslavia.

jamesd

That seems to be lacking a reference to US coverage and the list of Qualifying Recognised Overseas Pension Schemes. Mension of the Totalization Agreement with the United Kingdom might also be interesting, to the exent that confusing messes that make opting out of SERPS an easy choice is interesting.

I've seen a mention that the US may currently be prohibiting transfers of pension funds from the UK to the US because of money laundering concerns but have no details.

This probably just means that you have something more specific for those whose retirement plans have to factor in US rules.:)


Bisoy, you are currently apparently acting unwisely in each aspect of your retirement income planning, both in not being a member of the work pension scheme and in desiring little or no risk for very long term retirement income investing. You should really be checking to see if you can claim the NHS pension while living outside the UK and what the payment rules for it are.

EdInvestor

Of course you can receive your NHS pension overseas.But you must pay tax on it in the UK before transferring the money.

OK you have exchange rate risk, but that may work in your favour.And there are more and more banks providing cheap deals for transferring regular payments, because there are growing number of retired UK expats.

IMHO Bisoy should certainly look more carefully at joining the NHS scheme, not least because of the large employer contribution.But if that's not wanted then the maxi stocks and shares ISA (7k a year) is the best bet, as he is doing now.Property investment is another good alternative..

Ian_W

Without an explanation I think Dh's post is blunt BUT not in any way, shape or form offensive to you personally or critical of your lifestyle. He's criticising your decision - not you personally. So your response is way OTT.

What he is saying is your decision is seriously money-wasting and, that being the case, you might as well be widdling it down the bog. And what's more, I fully agree though do think he should have explained why. I'm not a pensions expert and others will correct me if I'm wrong [some will even do so if I'm right! ] but here's my take on why it's a bad decision.

1. As others have said you're employer, the NHS Trust, makes a much bigger contribution that you - so you're turning down free money.
2. Your pension contribution is tax [and NI AFAIK] free. So dependent on whether you pay basic rate or HR tax is 30-50% less than the cost on your payslip. Of course ISA's are tax free at the other end whereas only some of your pension may be. There is an argument in some cases that ISAs are better - I don't think that applies overall with you.
3. The NHS scheme is final salary, in other words the benefits are defined and not dependent on how well your contributions are invested.
4. From age 55 [if it's payable then] it's index linked.
5. It provides valuable survivor benefits if you are married or have kids or do either whilst you're still working for them at some future point.
6. It is payable overseas and in many countries [though not all] will still be index linked on payment.
7. If you only work for them for a few of months or even a couple of years then these benefits, though still valuable won't be as important to your retirement. However, lots of folks plans change - the couple of years you envisaged might stretch to ten and then you find that you've wasted the opportunity to be in a very good pension schem for a quarter of your working life.

Hope that explains it better Bisoy - like jamesd says I think you need to reconsider your decision about the NHS pension scheme. But first, I think you need to reconsider your post above!!

Bisoy

Thanks guys for all your replies.

If my reply was OTT then my apologies. As I have said it was a genuine query and would like to know my options. If it has been explained better in a context that is not confrontational ( being judged that I'm wasting money ) could have been better.

I would certainly looking at the options mentioned above. Many thanks.