Taking ALL of my pension "pot" tax free?

zafod1

My wife and I are planning to retire to somewhere sunny next year. We have decided to get residency in Portugal which, on initial research, should give me an opportunity to withdraw all of my pension pot (currently around £200k) tax free.

Why do I assume this?
1. The "Double Tax Treaty" between UK and Portugal (tax paid only to the country where you have residency)
2. Current "NHR" rules in Portugal (UK expats who move to Portugal will receive all of their pension income completely tax free for 10 years)

This should mean that once I've got "residence" in Portugal (spending 183 days per year minimum and owning/renting a property) and have successfully applied for their NHR scheme - I could then withdraw my entire pension pot without having to pay any tax on it.

Am I missing anything here?

NoMore

Recent thread discussing the same thing: https://forums.moneysavingexpert.com/discussion/5197633

atush

Have you been there before? Do you like Portugal? How much would a home cost?

It seems to me a daft idea to move somewhere only to save tax (ie no other reason). If you retired here, and took your 25% TFLS and then drew up to your PA each year you would also not pay any tax.

agarnett

I am sure the opportunity has some attraction to many, atush, so you surely can't dismiss it as daft?

It is no dafter than someone downsizing, or moving out of town to the country or to a cheaper area, is it? Especially if you only have to try it long enough to release your tax free cash !

People are generally much more mobile Europe-wide, as Ryanair's 300 odd aircraft kept busy daily are testament.

Most UK working people know that Portugal is a place for leisure, and even culture, and indeed many wealthy people from the UK spend a lot of leisure time there. So really, what's daft about letting a massive tax saving influence your next major financial decision when you know you can't really lose?

Unless, that is, you feel that anyone using it as a loophole might have the tax they've avoided clawed back should they dare to return too fast with a full pocket instead of a full pot!?

I am sure it is already being thoroughly exploited by the wealthy who've been flitting off regularly to villas in Qinta do Lago for decades now !

So why not the OP if they can manage to fit the bill?

jamesd

What you are considering is entirely possible. Note the potential catches if you were to return to the UK within a few years of doing it. You can probably find somewhere outside the UK where you're content to live for a while even if that ends up not being Portugal.

Also ensure that you don't do things like having a property available for your use in the UK, lest HMRC claim that you are resident here anyway. Letting out any property in the UK should suffice to make it unavailable to you.

The ability to save £30,000 in basic rate income tax by choosing Portugal as your first sunny place residence is quite desirable. You'll presumably also save money on other pension or investment income as well.

SeniorSam

If you do what you are considering and move back to the UK in later life, don't expect any financial support if you run short of income. The government would not allow someone who has spent their pension and then expected to be suported. Probably not an issue for either of you, but worth mentioning in case others thought of cashing in their pensions.

jamesd

SeniorSam, please provide links to the relevant official announcements stating that means tested benefits will not be provided to those who no longer have money left in their personal pension pots.

I'm aware of no such policy, however large or small the pension pot and whether the money was taxed or not as it was withdrawn. Nor have I seen anything relating to special worse treatment for those who draw their pension pots in other parts of the EU or broader world.

kidmugsy

SeniorSam wrote: »

If you do what you are considering and move back to the UK in later life, don't expect any financial support if you run short of income. The government would not allow someone who has spent their pension and then expected to be supported.

There is zero chance of any UK government having the intestinal fortitude to do any such thing.

SeniorSam

As far as I knowm there is no actual policy as yet. I have only read reports in the press that such actions are more than likely to be brought in if someone deliberatly was to squander the pension they have built up for rerirement.

It seems quite logical that such a rule would be brough in, as the new rules on pension encashment could easily bring forth a glut of people over 55 that would take all their pensions, spend the lot and think that the State would support them in their old age. Some logic needs to prevail, but unfortunately the government may not have thought this through sufficiently to make the public more aware. Already there are many who think that they can spend it all from age 55. Yes they can, but they should not expect support in later life.

SeniorSam

kidmugsy wrote: »

There is zero chance of any UK government having the intestinal fortitude to do any such thing.

I believe that it will definately be made clearer before too long, otherwise the floodgates will be open to all sorts of stupidity.

agarnett

SeniorSam wrote: »

I believe that it will definately be made clearer before too long, otherwise the floodgates will be open to all sorts of stupidity.

They are already open to all manner of unregulated insider activity anyway (stupidity?), so are you advocating business as usual except for the great unwashed ?

I quite like Portugal and I quite like some other non-UK parts of EU too.

I quite fancy the grand tour - how soon can I start and if I leave my tent pitched in the Algarve will that serve for my 0% taxed drawdowns while I flit about like some forever young retired type ? Can I still do my 2 months on the club circuit in Ibiza in the summer?

Will anyone be watching my dates of travel - dare I set foot back in Blighty a day too soon or will the Stasi be reporting from behind the curtains ? Maybe they're already in plain clothes on the most likely Portuguese campsites watching the zippers on the tent-flaps if not on our soon to be bulging wallets

Edit: ... and perish the thought on "squandering" - is that a new word shortly to appear in the guidance notes for benefits decision makers alongside deprivation of capital ? It once took two to tango on deprivation, but with squandering, you're alone for the duration, is that it? Actually they'll probably call it something biblical like deliberate prodigality, but won't easily forgive anything biblically as in welcoming the return of any dirty rotten prodigals