Run The Money
Follow Run The Money

Money Talk For Brits Retiring In America

  • March 21, 2019

If you're reading this, I'm earning money in some way. I was compensated with money and/or product. Thanks for helping to feed my family. I also may have a financial interest in companies named. Please see our disclosure for more information. Also, any advice provided is for informational purposes only. I'm not an accountant, lawyer, doctor, fitness expert, or nutrition specialist. So, talk to a professional before acting on anything you read, watch, or listen to below. Get your own advice and do your own research. Email me at [email protected] with questions.

Money Talk For Brits Retiring In America

More and more Brits are taking the plunge and moving overseas. America has become a popular choice for a lot of them, and it’s not hard to see why. After all, our vast country has so much to offer! When moving abroad, there is a lot that needs to be considered, and money is one of the key areas of discussion. With that being said, read on to discover some key pieces of advice for those retiring in the USA specifically.

Transferring your pension

QROPS stands for Qualifying Recognised Overseas Pension Scheme. This pension has been designed for British expats and international workers who are based offshore yet have pension rights in the United Kingdom. The whole purpose of QROPS is to essentially give anyone who has British pension rights much easier access to their retirement savings in the instance that they were to move abroad on a permanent basis. This type of UK pensions transfer is extremely beneficial. Let’s assess some of the key advantages.

  • One of the main attractions to a QROPS is the ability to bypass the continual government interventions occurring in regards to pensions in the UK. This includes everything from changing lifetime allowances, to scrapping allowances, to moving back retirement dates.
  • Another advantage of opting for QROPS is the fact that you will have the ability to have your pension income denominated in a currency other than sterling. If you were only able to draw your money in sterling you may end up losing substantial value when it comes to your pension savings.
  • A great gain achieved via going down this route is the fact you will benefit from much more flexible investment options out of the UK.
  • Flexibility with regards to investment is not the only thing you will gain advantage of. You also have the opportunity to choose from self-managed and managed schemes.
  • In most instances you will find that the tax rates in QROPS jurisdictions are often much more competitive when compared with rates in the UK. This is worth elaborating a bit further on. Let’s say you don’t seek a UK pensions transfer but you retire outside of the UK. As a result your pension payments from the UK will actually be treated as UK taxable income. When you consider the fact that this is a country with a top rate of 50 per cent for high income earners you see the evident issue. With a QROPS you can avoid tax being deducted from the source.
  • It is also possible to avoid the 55 per cent tax put in place on anyone in the UK who opts to take their lump sum but does not buy annuity. What happens in this instance is that if you die and your UK pension is in drawdown you can leave the lump sum to your heirs. However, you will suffer the 55 per cent penalty as mentioned. If you have a QROPS it is possible to avoid this because these tax penalties do no longer apply to a QROPS if you have been a non-UK resident for five whole tax years.

Consider expert advice

A QROPS may all sound a bit confusing to you if it is something you have never considered greatly before. But don’t worry, as this is why experts are on hand to ensure your UK pensions transfer runs smoothly. Experts will be able to assist if you are also not yet in the retirement phase, but soon will be. They can set up a self directed IRA or any other type of financial product that is going to set you up for your retirement in the USA.

If you are planning on retiring in America, it is so important to make sure that you have all of your finances in order. Firstly, you need to think about how you are going to manage your money right now so that you have enough for your retirement. You then need to consider how you are going to transfer your pension so that you will receive this money while you are living abroad. Hopefully, the information provided in this blog post has been of assistance.