Brexit's impacting my ability to drawdown through a UK provider
09 July 2021
Question by Anita
I live in Germany - an UK expatriate - I currently have 3 pension plans 2 with Phoenix life - one small but doing fine - plodding. One has underperformed massively in this year.
I have a defined benefits pension. Plus have 2 house rentals in the UK. I am 60 and think there is enough for me to retire on.
However, am finding it difficult opening a drawdown SIPP with a UK provider.
I had an eye on A J Bell and have been monitoring them and a couple of others. Only to find that that option as of December 21st is now closed thanks to Brexit.
So, what does one do? I would ideally like to have the facility to use up to 25 percent of my Phoenix funds via transference to a provider.
There on pretty much leave the 75 percent pot intact until I reach 67
My intent is to return to the UK after all this stuff with Covid, Brexit etc has all settled down, which would be in Oxfordshire.
Answered by Nicola Crosbie
Anita, as a British Expat living in Germany, it is important that you understand your local tax rules so that you are not inadvertently penalised. There was a double taxation agreement in place between the UK and Germany from 2011, but this was prior to UK leaving the European Union. I would recommend discussing this with a local tax advisor in Germany to understand the post Brexit impact and investigate whether receiving pension payments from the UK, as a lump sum or income, will now have tax implications for you as a German resident.
Once you access your pension pot, you have the same options as you would if you were living in the UK. However, the tax situation is more complicated if you are abroad and this can affect which options are best for you. For example, what is considered a tax-free lump sum in the UK, could be deemed as income in Germany. We recommend you source specialist financial advice in both countries due to the additional complexities you face, particularly in a post Brexit landscape. Individual advice is required from both a tax and pensions specialist before making any decisions. Regarding consolidation of your pension pots, an advisor would be able to assess the pros and cons of consolidating your arrangement. Either into a UK based pension plan, like a Self Invested Personal Pension (SIPP) to access flexibly, or if potentially a 'qualifying recognised overseas pension scheme' (QROPs) would be more suited to your needs. They would also be able to advise if your defined benefits are better drawn direct from the scheme or transferred to an arrangement which can be flexibly accessed, taking into account factors such as your income needs, your marital status, your capacity for loss and attitude to risk.
It is possible for all your pension benefits to be paid to you in Germany direct from the scheme. You would still benefit from any annual increases as if you were living in the UK. Some providers will only pay withdrawals to a UK bank account, others may pay direct to an overseas bank on request. Additional charges would likely apply and as your pension income will be paid in Pounds Sterling, it will be affected by fluctuations in exchange rates when you convert into Euro’s. Your income will fall and rise in line with currency exchange rates. If the rates go against you, it can seriously affect how much lump sum or future income you receive.
As a starting point, you can find UK registered financial advisers here
Should you return to the UK permanently, you should contact the Pension Service to ensure they are updated of your UK residency. This will ensure any state pension payments rise annually in line on the agreed triple lock basis. Inflation proofing for UK state pensions is removed on benefits accessed by non-UK residents. You must now have contributed 10 years National Insurance to be eligible. You can obtain a state pension forecast at https://www.gov.uk/state-pension
Chartered Financial Planner
With 20 years’ experience behind her, Nicola takes a coaching approach to financial advice, helping even the most nervous investors to take control of their financial situation by empowering them to make more confident, positive decisions for the future. Based in Lochwinnoch, Scotland where she is the Director of Moran Wealth Management Ltd, thanks to secure remote-working practices Nicola supports clients all over the UK.