Thailand has emerged as a real destination of choice for British expatriates choosing to retire away from the UK. The country certainly has a lot going for it in its appeal to Brits; a great climate, very low-cost of living, idyllic and beautiful surroundings, extremely friendly and hospitable locals, and a number of other prime tourist destinations to visit close by, to name but a few.
But with retiring in Thailand comes many key considerations, and as well as giving thought to which paradise island one wishes to relocate to, arrangements must be put in place in relation to what assets remain in the UK, specifically any pensions.
This is where the long-established HMRC Qualifying Recognised Overseas Pension Scheme (QROPS) initiative comes into play. Many will already be familiar with the opportunity thousands of expats take each year to protect their pensions from the UK government, and one of the most severe tax regimes in the world. But for those that don’t know, a QROPS offers a long line of benefits unable to be replicated in the UK’s stricken pension market.
A pension scheme held overseas which declares itself open as a QROPS entitles UK pension holders now living abroad to some of the following advantages:
- Avoid currency fluctuations between the Thai Baht and the British Pound
- Withdraw your pension free of British tax
- Take up to 30% as lump sum completely free of any jurisdictional tax
- Vast investment opportunities from an array of global markets
- Easily manageable fund, paid directly into a Thai bank account
- Flexible Access options available
- Succession and estate planning efficiency
Sadly no QROPS exist in Thailand itself, however a number of pension schemes within European jurisdictions exist with regulations and benefits in place which are perfectly matched to work with a retiree based in Thailand.
Choosing the correct jurisdiction can mean you pay as little as 2.5% tax on withdrawal (or potentially zero), and for those with significant sums invested in UK schemes, the tax savings can mean the difference between the retirement dream, or the retirement nightmare being realised.
Each case is of course very much individual, and the choice of jurisdiction, indeed the choice of whether or not to transfer into a QROPS, should only be considered with the aid of a qualified professional familiar with your own personal plans and situation.
If pensions are left in the UK, they are unfortunately left open to the ever-changing rules imposed by a government completely at a loss as to what to do about the increasing pension deficit. This will eventually mean higher taxation upon withdrawal, and extension to the age at which one is able to access their funds, and potentially new, as yet unknown legislation that could damage expatriates’ retirement prospects across the globe.
The key question many expats are asking is: “If I’ve spent my life paying tax on contributions, tax on income, tax on every item I’ve ever purchased in the UK, as well as council tax, and I no longer intend to ever live in the UK again, how can I justify contributing yet more money form my own pension fund in tax?” It’s an interesting point…