Relocating to Guernsey…don’t forget your pension!

Individuals and families choose to relocate for several reasons.

For many the appeal of permanently relocating to Guernsey is for a better work/life balance or for the safety and security the island offers that makes it an ideal place to live and raise a family.

There is always a lot to consider when relocating and one matter that may not be at the top of everyone’s list to think about is what to do with their pension. However, this should be on the “To Do” list because it is possible for an individual to move their pension with them when they relocate, which can provide some unique benefits.

The UK introduced an overseas pension transfer framework in 2006 to comply with an EU Directive for freedom of capital movement, and that framework has been maintained despite the UK having since exited the EU. The legislation allows for certain types of non-UK pension schemes known as Qualifying Recognised Overseas Pension Scheme (QROPS) to receive authorised transfers from UK registered pension schemes.

Specifically, for those relocating to Guernsey who have pensions which are or were in the UK it is possible to transfer the pension(s) into a suitable receiving scheme in Guernsey subject to that scheme meeting the requirements to be a QROPS. This is a complex area and requires specialist advice given the UK transfer rules and potential tax charges on certain types of transfer, particularly for high value pension transfers.

There can be advantages for someone relocating to Guernsey to transfer their UK registered pension schemes, not from a tax perspective necessarily as the position will often be similar but more from a practical perspective.  Not least of all, having a pension provider and financial adviser based locally in Guernsey for someone living in Guernsey will help make their life far easier. This can make a real difference and ensure the hassle-free intention of relocating is not disrupted by unnecessary admin burden when it comes time to receive their pension.

It can often be time consuming and frustrating for non-UK resident clients to deal with UK pension providers as, understandably, the bulk of their processes, rules and procedures are developed for UK resident clients and are not always suitable and often not user friendly for a non-UK resident.

For an individual transferring to a Guernsey QROPS from a UK registered pension scheme they can benefit from a tax-free pension commencement lump sum entitlement of up to 25% without any upper limit as opposed to a current upper limit of £268,275 payable tax-free from a UK registered pension scheme.

The benefits of the above may be offset by the Overseas Transfer Allowance where the value of a transfer exceeds £1,073,100, as this can result in a tax charge of 25% applying on the surplus amount above £1,073,100, hence why specialist advice is key in this area. The Overseas Transfer Allowance is a newly introduced concept in the UK following the removal of the Lifetime Allowance.

Longer term, there can be other benefits for those leaving the UK and transferring a UK pension to the jurisdiction to which they are relocating as this can support that ties with the UK are being severed and a permanent home elsewhere is being established. This may be helpful for those wishing to evidence that they have left the UK permanently and have no intention to return, which can be important for inheritance and estate purposes.

It is also fair to say that the pensions legal and tax framework in the UK is complex and subject to frequent change. The position in Guernsey is very different with very few changes made to the legislative and tax framework creating a stable, consistent, and secure environment that allows peace of mind that planning will provide long term benefits.

Anyone relocating to Guernsey from the UK who is interested in transferring their UK pension benefits to Guernsey should seek specialist financial advice. It is a complex area that may require advice both in the UK and in Guernsey, but the long-term upside of ease, convenience, stability, security, and potential tax/financial related benefits mean in the right circumstances it can be a very worthwhile process.