A FINANCIAL advisor has reflected on the UK budget which, he says, could have some worrying implications for UK pension holders living abroad

UK Chancellor, George Osborne, announced in his 2014 Budget the Government will put in place legislation that will prevent individuals from transferring out of public sector schemes.

The budget documents from March outline the situation clearly: “Having considered this carefully, the Government intends to introduce legislation to remove the option to transfer for those in public sector schemes, except in very limited circumstances.”

The documents go on to say that private sector defined-benefit schemes also play a role in funding long-term investment in the UK, and that the Government does not wish to permit transfers away from such schemes if it might put the UK economy at risk.  

The suggestion is therefore that many corporate pension schemes will follow the example set by the public sector schemes.  

Currently, no date has been set for these changes – but that it is intended to take place for the next budget, and that the ban could occur imminently.

Thomas Marron, a consultant at Forth Capital in Geneva – Independent Financial Advisers to expatriates said this has major implications for many UK pension holders who live in Switzerland and elsewhere around the world.  

Historically, such people have had the opportunity to take their pensions with them when they leave the UK by transferring their pension into a ‘Qualifying Recognised Overseas Pension Scheme’ (or QROPS) – a HMRC approved way of moving pension benefits abroad.  

He said this can provide greater benefits and flexibility than UK schemes – namely enhanced death benefits, choice of currency, and often an improved income situation at retirement.

While this remains a viable option at present, it will soon be closed to many.

Some will resent that their pension funds are being ‘held hostage’ as a means to prop up the economy of a country where they no longer reside; others will simply be concerned by the diminishing range of options available to them.

He said that is not to say, that UK pension holders should initiate a transfer without hesitation.  Pension transfers are matters which continue to require diligence and careful analysis.

But at the very least, those with defined benefit schemes should now find themselves motivated to examine the possibilities.  “This time next year will almost certainly be too late,” he added.