Extracting pension pots: the Portugal plan

Thrugelmir

chucknorris wrote: »

We plan to eventually spend up to my 5 months (but more likely only 3 months) per annum over there during the winter/autumn anyway, so it might be worth us considering staying on if there was a significant advantage to be had.

My thoughts were on a broader level. Rather than the jam today nature of thinking that pervades the UK today. Portugal like other European countries faces budgetary challenges in the years ahead. Uncertainty is not the best place to start planning something which is some years away.

Aegis

jamesd wrote: »

I'd welcome pointers to such rules, notably in relation to flexi-access drawdown. The statutory Residence test seems to cover much of it but no mention that I've found so far for flexi-access drawdown, though I think it's inconceivable that the law would not be changed to include it.

From https://www.gov.uk/government/publications/taxation-of-pensions-bill-briefing-note/taxation-of-pensions-bill-briefing-note

It sets out that “relevant withdrawals” (essentially the same withdrawals that constitute flexible access for the purposes of triggering the reduced Annual Allowance and equivalent payments to dependants) from pensions which are made while an individual is temporarily non-resident for UK tax purposes will be treated as arising when in the year that individual returns to the UK and subject to normal UK tax rules, unless these withdrawals have been less than £100,000 in total. This applies to relevant withdrawals from registered pension schemes and from relevant non-UK schemes.

Full wording from the draft legislation (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/340913/Annex_A_Draft_Taxation_of_Pensions_Bill.pdf):

73 (1) Section 579CA as substituted by paragraph 117 of Schedule 45 to FA 2013
(pensions under registered pension schemes: temporary non-residents) is
amended as follows.
(2) In subsection (2) (relevant withdrawals treated as accruing in the year of
return from temporary non-residence) at the end insert “, but only if the total
amount of the relevant withdrawals within subsection (3) exceeds £100,000”.
(3) For subsection (4) (meaning of “relevant withdrawal”) substitute—
“(4) A “relevant withdrawal” is—
(a) any income withdrawal paid to the person from a member’s
flexi-access drawdown fund in respect of an arrangement
relating to the person under a registered pension scheme,
(b) any dependants’ income withdrawal paid to the person from
a dependant’s flexi-access drawdown fund in respect of an
arrangement relating to the person under a registered
pension scheme,
(c) any payment to the person of a short-term annuity purchased
using sums or assets out of a member’s flexi-access
drawdown fund in respect of an arrangement relating to the
person under a registered pension scheme,
(d) any payment to the person of a dependants’ short-term
annuity purchased using sums or assets out of a dependant’s
flexi-access drawdown fund in respect of an arrangement
relating to the person under a registered pension scheme,
(e) any uncrystallised funds pension lump sum paid to the
person in respect of an arrangement relating to the person
under a registered pension scheme, but only so far as the sum
is treated as a pension to which section 579A applies (see
section 636A), or
(f) any income withdrawal, or dependants’ income withdrawal,
paid before 6 April 2015 to the person under a registered
pension scheme in respect of an arrangement relating to the
person under the scheme which at the time of the payment
was an arrangement to which section 165(3A) or 167(2A) of
FA 2004 applied (flexible drawdown arrangements).
(4A) For the purpose of determining whether the figure specified in
subsection (2) is exceeded, any relevant withdrawal paid in a
currency other than sterling is to be translated into sterling using the
average exchange rate for the year ending with 31 March in the tax
year in which the relevant withdrawal is paid.”
(4) In subsection (7) for the definition of “flexible drawdown arrangement”
substitute—
““member’s flexi-access drawdown fund”, “short-term
annuity”, “dependant’s flexi-access drawdown fund”,
“dependants’ short-term annuity” and “uncrystallised funds
pension lump sum” have the same meaning as in Part 4 of FA
2004 (see paragraphs 6, 8A, 20 and 22A of Schedule 28, and
paragraph 4A of Schedule 29, to FA 2004).”
(5) The amendments made by this paragraph come into force on 6 April 2015.

jamesd

Thanks. So a bit of advance planning required, as usual with pensions. Looks easy enough for those with modest sized pots up to £100,000 after PCLS to save around £30,000 of income tax, larger amounts with more planning of when to return, if at all.

sandsy

jamesd wrote: »

Thanks. So a bit of advance planning required, as usual with pensions. Looks easy enough for those with modest sized pots up to £100,000 after PCLS to save around £30,000 of income tax, larger amounts with more planning of when to return, if at all.

I guess the saving then needs to be compared to the net costs of upping sticks and resettling in a new place for the period, and the return costs. Those costs will depend what an individual does with their existing property, the relative living costs overseas etc.