- Posts: 789
- Joined: Fri 07 Mar 2014 10:17 am
What i am suggesting is using two different laws/agreements. That of pensions freedom and double taxation agreements.
As most of you will be aware is that pension income gets taxed at source in the uk. If you are resident in another country that has a double taxation agreement with the uk you will be taxed in the country that the agreement states - to prevent you being taxed twice in each country . For example if you are resident in france the d,t.a. States tax should be paid in france. So you obtain a residency tax certificate from the french authorities and give it to your uk pension provider who then present this to hmrc and your pension is no longer taxed at source and paid gross. You need to also be aware that if you return to the uk in the next 5 years to live you can be taxed on the pension income already received .
So the place i am planning to become a resident of when i reach 55 is the u.a.e either dubai or abu dhabi. On pension income there is zero tax ! A d.t.a.exists with the uk and tax is due in u.a.e.! So once in receipt of a tax residency certificate your uk provider can pay your pension gross. I see two routes to residency either you can buy a property for 1000000 uaed (c £200 k ) or you can set up a u.a.e company which costs a few grand. Once you have your tax residency certificate and it has been presented to your pension provider there is no requirement to stay in u.a.e. As long as you do not go back and live in the uk in the next 5 years .
The second important feature is pensions freedom -recent legislation allows you to access your pension in full paying tax at your marginal rate .
Heres a hypothetical example in full:
Jim is 55 and has a substantial uk pension pot of £800 k . Jim lives in the trnc and takes his 25 % tax free cash of £200 k. He then decides to buy a property in dubai as the market has crashed there and he thinks its a good investment . This qualifies jim as a resident for 2 years and the authorities issue him with a tax resident certificate which he then sends to his uk pension provider. They pay his pension gross - tax frees so he says “ great show me the money “ . Jim under pension freedom takes the remainder of his pension £600 k in one lump sum and transfers the money offshore . After getting his money jim decides u.a.e.is not for him and moves back to the trnc and rents out his newly purchased dubai pad.
He now has full control of his pension cash away from the uk tax authorities and has legally paid zero tax. What he does with the money now is another story!
I appreciate only a few will have pension pots this big but the same rules can be used by all. If you dont have 200 k to buy a property you can set up a u.a.e.company for a few grand . Also southern cyprus is a possible consideration as there is an option to pay 5 % tax on pension income and a d.t.a.exists . Meaning you can take your pension pot in full and only pay 5 % on your pot after taking your tax free cash.
Just musings . Its only relevant really for people who have pensions pots where the income takes them over the uk tax allowances or want access to the full pot.
Just to add if you decided to take your uk pension in full you would pay 40% on any amount over 50k and 45% on amounts over 150 k so the savings are potentially massive .
- Posts: 4178
- Joined: Sun 13 May 2012 7:21 am
- Posts: 3598
- Joined: Fri 16 Mar 2018 4:46 pm
My understanding is military pensions may not be transferred to overseas or to Defined Contribution/private pension schemes but it is possible to transfer them to other Defined Benefit schemes, including other public sector schemes. Civil service pensions I don’t know about but I would guess it’s the same.waddo wrote:Reyntj, Interesting but I take it that anyone who has a Government Pension, i.e. Military/Civil Service can not access their pension pots anyway? Just a thought.