Expats seeking to cash in their UK personal pensions next year under new British government legislation may expect some difficulties along the way.
From April next year, pension pots can be accessed once a person reaches 55. People will be able to take as much of the money as they wish, although 75% is taxable at a marginal rate and 25% is free of tax.
Tom McPhail, head of pensions at Hargreaves Lansdown, said: "In principle, your pensions provider can remit payments to you wherever you are in the world, but in practice most will ask you to have a UK bank account."
He added: "The other thing to watch for, if you are not resident in the UK for tax purposes, is that HMRC could use an emergency tax code and you will have to go through the rigmarole of getting the money back from HMRC. Check what [your pension scheme provider] will do with your tax code before you press the go button."
Expats are likely to experience delay in receiving the funds, not least because Mr McPhail believes that the pension industry is trying to cope with “an unprecedented onslaught of legislative and regulatory change”.
“Millions of pension savers are being encouraged to withdraw their money at will. This is fine as far as it goes, but managing longevity and investment risk is complicated, particularly if you have been defaulted into a pension, you’ve never engaged with it and you don’t know what you’re doing. Many professionals struggle to get it right so the idea that at least some inexperienced investors won’t get it wrong is recklessly naive.”
The change in legislation announced only recently by the Chancellor seemed to take the industry by surprise. No doubt there will be much more information available before the new system begins to operate.