17 June 2008
Tax-free retirement for emigrating Brits
New rules passed by the Government allow British nationals to take their UK pension savings scheme abroad and avoid paying tax, reports the Telegraph newspaper.
Under the legislation, retirement savings can be transferred to a foreign pension plan tax-free. However, the Government requires the retiree to emigrate permanently, and transfer the funds to a specified pension plan in approved countries for a minimum of five years. After the five years, the pension savings can be converted to cash, without paying tax.
The new laws, passed in April 2006, are largely beneficial to those with large retirement savings due to the high costs of relocation and transferring funds offshore, but it has not stopped the thousands of Britons immigrating annually to places such as Australia and New Zealand. The Isle of Man, Guernsey, Jersey, Australia, New Zealand and Switzerland are top of the approved list for retired emigrants.
One advisor speaking to the Guardian newspaper said, “The government is kidding itself if it thinks people with large pensions are going to pay tax when they don't need to. There appears to be nothing to stop someone moving their pension pot to a tax haven like the Isle of Man and living off the proceeds in Spain, or wherever. After five years they can take complete control of their funds without any of the strict rules that apply to UK pensions."