For Brits living in Poland or Poles who have returned home after living in the UK, one of the big questions involves what to do with any pension schemes that they have accumulated in Britain.
This dilemma has become even more pertinent in the light of Brexit and the additional uncertainty that it brings to the table. However, you shouldn’t let Brexit influence your decision around what to do with your pension. Many things will change as a result of it. Your UK pension benefits are not one of them.
Firstly, unfortunately, the answer to the question of whether you can transfer your UK pension to a scheme in Poland, is, no you can’t. This is confirmed on the UK government recognised overseas pension schemes notification list.
However, this does not end your options. For anyone who is resident in Poland and has a UK pension, there are 3 potential courses of action open:
Option 1 – Do nothing
That’s right, leave your pension where it is.
Although it would still be worth reviewing the investments within your pension to make sure that they are in line with your objectives and risk profile.
Certainly, if your pension is a defined benefit/final salary scheme, there may be very good reasons for leaving it where it is.
At the very least, you should be fully aware of the benefits available through your current scheme before considering giving them up.
Option 2 – International SIPP (Self Invested Personal Pension)
A SIPP is a pension scheme that is established under trust in the UK.
It allows you to accept the cash equivalent transfer value (CETV) from a defined benefit scheme as well as consolidate a number of smaller schemes.
Some of the benefits of transferring your pension to such a structure are as follows:
- It is covered by the UK Poland double taxation treaty (irrespective of Brexit). This means that you can be sure that your 25% pension commencement lump sum (PCLS) will be tax free.
- You have flexibility in terms of how your pension is invested
- You have the option to hold your pension in a currency that is more closely matched to your future expenses and liabilities (e.g. EUR)
- You have flexibility in terms of how pension income and lump sums are withdrawn (from minimum pension age of 55)
- You potentially have greater flexibility to decide who will be nominated as beneficiaries under your pension
Option 3 – Qualifying Recognized Overseas Pension Scheme (QROPS)
Unlike a SIPP, a QROPS will not be governed in the UK. Instead, it will be set up in a jurisdiction such as Malta, Isle of Man or Gibraltar.
The benefits of using a QROPS for residents of Poland are largely similar to those of a SIPP (see above). However, often the running costs will be higher.
One identifiable benefit of a QROPS over the SIPP option is that payments made from a SIPP will typically be in Sterling. With a QROPS however, you could have them paid in Euro.
This is likely to be an attractive option if your future liabilities and expenses are in Poland as there is a much closer correlation between PLN and EUR than PLN and GBP.
QROPS tax treatment in Poland
It is vitally important that you understand the implications of any double taxation treaty between Poland and the country in which your QROPS is/will be located.
In some cases it will be much less favorable than the treaty between the UK and Poland.
Poland, QROPS and the Overseas Transfer Charge (OTC)
The Overseas Transfer Charge came into effect from 9th March 2017 (with 24 hours notice!!!) and applies to most QROPS transfers.
It is charged at 25% of the transferred value.
The charge is automatically deducted by the QROPS manager from your fund and transferred to HMRC.
However, as Poland is an EEA country, you will avoid the Overseas Transfer Charge if you are resident here, as long as the QROPS that you transfer to is also in an EU country (e.g. Malta).
At the end of the day, whether a UK Pension Transfer for you as a Polish resident is the best course of action or not, will be dependent upon your individual circumstances and specific financial plans. Feel free to e-mail me if you would like to discuss further – email@example.com.