Is my workplace pension money just lost? (French working in London)

[Deleted User]

Hello all,

I am a French expat and have been enrolled in my workplace pension for 3 years now (Zurich). I will be starting a new job at the end of November and started looking more into my workplace pension ahead of the change. But what I have found out scared me a bit.

I am not looking to live forever in the UK. The plan would be to move to a different EU country or go back to France in a few years. However, it looks like it's not possible to take out the money I've saved in my pension when I decide to leave the country? I've also stumbled upon an article saying that it was impossible to transfer the funds to a French pension provider now. Is that true?

Should I enroll in my next job's pension or would it be better to just opt-out since I'm not planning to end my days in the UK?

Overall I am lost and confused and a bit scared that the money I have saved up until then is just lost. (I am 28 if that helps).

Thank you very much for your help.

JoeCrystal

Of course not. The fund is still invested. What kind of pension scheme it is? Defined Benefit or Defined Contribution? The whole point of it was to save up for your retirement so you can access it when you get to 55.

[Deleted User]

JoeCrystal wrote: »

Of course not. The fund is still invested. What kind of pension scheme it is? Defined Benefit or Defined Contribution? The whole point of it was to save up for your retirement so you can access it when you get to 55.

First, thank you for answering.

Which question is your "Of course not" answering to?
As for your second question, I honestly have no idea. I was automatically enrolled in my current workplace pension. The only thing it says is that the scheme name is a retirement savings plan. 2% of my salary goes into the workplace pension if that helps.
So even if I were to move back to France, I would still be able to access the funds once I reach retirement age?

badmemory

Of course not refers to no-one stealing your fund. Currently we are only able to access our retirement funds at 55 (expected to increase to 57 then 58). To access them earlier than that may incur serious penalties. I seriously doubt even Brexit will stop you from accessing those funds. If it does then we are all up the creek without a paddle.

EdSwippet

emmzeex wrote: »

So even if I were to move back to France, I would still be able to access the funds once I reach retirement age?

Yes. This recent article describes your options. It's written from the perspective of a long-term UK resident citizen retiring to France, but what it describes will apply equally to your UK pension when you return to France.

In summary, you can either leave your UK pension until you are age 55, when you then draw on it and pay tax on the withdrawals at French income tax rates, or you can venture into QROPS but with the proviso that the UK will apparently no longer allow UK pensions to transfer into French schemes.

What to do, then? I would consider how long you expect to be in the UK. If only a couple of years then a small pension held in what will be to you a foreign country will likely be more paperwork hassle than it is worth (although after three years in another pension/company, you have already effectively passed the point where that has happened).

At the other end of things, consider your UK tax rate. If solidly 40%, 45% or especially in the effective 60% band at £100-£120k or so, a pension makes sense purely on tax mitigation grounds. Also if your employer offers a generous match but with no alternative in salary if you opt out, it would be silly to pass on it.

No easy answer, then. For what it's worth, I have a pension trapped in a foreign country that I cannot move to the UK, and while it is not a huge hassle it most definitely is a complication that I could do without, but now am stuck with. I am not sure if I would do things differently if I had to make the choice again, but I would certainly think about whether or not I wanted that to happen much more closely now than I did at the time.

[Deleted User]

EdSwippet wrote: »

At the other end of things, consider your UK tax rate. If solidly 40%, 45% or especially in the effective 60% band at £100-£120k or so, a pension makes sense purely on tax mitigation grounds. Also if your employer offers a generous match but with no alternative in salary if you opt out, it would be silly to pass on it.

No easy answer, then. For what it's worth, I have a pension trapped in a foreign country that I cannot move to the UK, and while it is not a huge hassle it most definitely is a complication that I could do without, but now am stuck with. I am not sure if I would do things differently if I had to make the choice again, but I would certainly think about whether or not I wanted that to happen much more closely now than I did at the time.

Thank you very much for you detailed answer. I guess I will wait and see what my new employer will offer and decide based upon that. As long as I know I can access the funds at some point I am happy. But the added hassle is definitely annoying.

One last question. I read the following on my workplace's pension's website:

On leaving service, your employer will stop paying into your plan. There are several options available to you:
You may continue to pay single payments into your plan directly with us, and/or
You can keep your plan invested in the fund(s) selected by you, and we will continue to take charges but these may change, or
The full value of your plan can be transferred to another pension plan, such as a personal pension, stakeholder pension or a future employer's stakeholder or pension scheme, if allowable.

Does this mean that the pension provider will take money out of my pension and the amount will slowly diminish?

Thank you!

EdSwippet

emmzeex wrote: »

Does this mean that the pension provider will take money out of my pension and the amount will slowly diminish?

Yes and no (probably).

Any pension provider will take an annual charge from your pension, perhaps somewhere around 0.2% to 0.75% or so. Check your employer's pension documentation for exact details of your current scheme. But over time the income generated by the funds you hold should more than make up for that, so that your funds increase rather than diminish.

Long term return from equities is around 7% or so, for bonds around 4-5%, and for cash around 1-2%, so clearly what you hold within that pension is going to matter a lot. At age 28 you have nearly 30 years before you can draw on this, so for best efficiency you would generally want to hold most of your pension in equities. If you only held cash then your pension amount would indeed quite likely diminish, perhaps not in nominal terms but certainly in real (that is, after-inflation) ones.

[Deleted User]

Thank you very much. This helps a lot.