Tax and Pension Related Challenges for UK Seniors

Tax code and general finance considerations become increasingly complicated as a person gets on in age. If you are over the age of 50 and approaching the age of retirement, make sure that you are aware of the following pitfalls and points of confusion faced by ageing citizens in the UK: 

Misunderstanding how pensions are taxed

You spend your whole life paying taxes on your income. Unfortunately, once you retire, this trend continues. However, the amount of tax that you owe on a pension depends on several factors, and it is easy to get confused regarding how much you owe – or even if you owe at all.

As an example, state pensions in the UK are not taxed below a certain level. You can read up on the specifics on how pensions are taxed on the HM Revenue & Customs website. However, the best way to proceed is to contact an accountant and have them assess your situation. Doing so ensures that you stay on the right side of the law without having to pay any more than is absolutely required. After all, every bit of savings counts when dealing with a fixed income. 

Finding the Right Forms

This is a problem that taxpayers of any age bracket can face. It is certainly not exclusive to seniors. The way in which tax forms are organised and prescribed is complicated to begin with, and anyone without a background in accounting or tax code law could be forgiven for being confused.

The problem is that filing an incorrect form can completely derail the tax return process. You may end up paying more (or less) than required. Likewise, filing an incorrect form could end up invalidating the entire return, subjecting you to further headaches (at minimum) or even fees.

Missing out on special credits and benefits

Every year, upwards of £5.5 billion in tax credits intended specifically for the elderly go unclaimed in the UK. These funds are made freely available by the government. However, the fact that their would-be recipients are unaware of them means that ultimately go unused.

These are a few common benefits that are often overlooked:

• Housing Benefit: This benefit is intended to help elderly persons pay for housing if they rent rather than own.
• Pension Credit: This benefit tops up your income to a guaranteed minimum level; roughly one in three eligible people fail to claim their pension credit. 
• Council Tax Benefit: This specifically applies to those who have disabilities or require special care.

Again, failure to understand what types of benefits are available to you could actually be costing you money in the long-run. With that in mind, seeking the services of a chartered accountant or financial advisor could actually end up earning you more money than you spent on the services to begin with. 

Mishandling your annuity

There have been a number of changes and revisions to the way annuities are handled in the UK. What many ageing Britons do not realise is that they are actually able to choose which firm they purchase the annuity through. Many are unaware that they can purchase an annuity from a firm aside from the one they have charged with taking care of their investments.

While it is refreshing to have more freedom and control over your financial future, this also exposes us to greater risk. Most importantly, long-term financial planning is not something that you want to attend to yourself if you do not have a background in finance. A single misstep could set you on track for financial ruin further down the road. With that in mind, consult the experts before you prematurely draw on an annuity. 

Counting on your pension before you qualify

Those who are nearing the age at which they qualify to draw a pension are likely to start making changes to the way they structure their budget, finances and assets. The problem here is that the government is constantly revising up the age at which a person qualifies. While new regulations are usually announced well before they are implemented, it is still possible that a person could end up banking on a monthly stipend that’s actually not even available to them for a few more years. Make sure that you know how the law applies to you before you make any major financial decisions.

Author: Kristen Rodrigues is a writer working on a freelance basis for Brebners, a company found in London and Kent that believes that they can help any business with their tax and accountancy matters.

How To Make Overseas Pension Transfers

If you are an expat with a pension in your home country, you might be thinking there is no point in moving your funds offshore. After all, the money is secure, you might not need it for a while and you trust your pension pot back home. Today, we invite pension expert Sofia Kluge, Web Editor & Community Manager at OPP award winning foreign exchange comparison site MyCurrencyTransfer.com to provide some tips on making overseas pension transfers. 

Why It Pays To Transfer Your Pension

What you may not know is that by transferring your pension to your new home country, you will be free of the restrictions and tax laws governing your pension right now. By transferring your pension you could potentially be thousands of pounds better off and have better control over what happens to your money once you retire. You’ve worked hard for the money in your pension so doesn’t it make sense to transfer your pension without risk?

Pension Transfer Requirements

In order to transfer your UK registered pension, you will need to transfer it to a Qualifying Registered Overseas Pension Scheme (QPROPS). The trustees of your current pension scheme will check that the scheme you are planning to transfer is a QPROPS and that it complies with HMRC requirements. 

What You Need To Know About QPROPS

QPROPS is a set of regulations set down by the HMRC. It is essential that the overseas pension scheme you select for your transfer comply with these regulations. If it doesn’t, you may be liable to pay a huge 55% unauthorised transfer charge. You won’t usually need to pay any UK tax fees because you will not be living in the UK when your QPROPS payments are made to you. 

QPROPS was first introduced in 2006 and was designed to give people living in the UK to emigrate to another country and to take their pension with them. Whether you are going to be drawing your pension in a couple of years or you plan to continue paying into your pension for many years to come, transferring it to your new home country makes a lot of sense. 

The QPROPS Process

Once you have decided that you would like to transfer your pension, you can speak to a QPROPS advisor to discuss the money transfer and the best way of organising everything. 

Your QPROPS service will usually include the following:

• A free initial consultation to ascertain your personal circumstances.
• If you decide to proceed with the QPROPS transfer, your advisor will give you a personalised report detailing their recommendations.
• Your advisor will then go over the recommendations to ensure you are clear on all points and have everything you need to make an informed choice. 
• If you are happy to proceed, your advisor will issue the relevant forms to you so that you can complete and sign them. 
• Your QPROPS advisor will then arrange the transfer of money from your UK scheme into your new QPROPS scheme overseas. 
• Once the money transfer has taken place, your QPROPS advisor will make all of the arrangements to ensure your monies are made available to you upon your retirement date.

Choosing The Right Pension Transfers Company

Before you decide to go ahead with your pension transfer, it pays to shop around for the right advice. The HMRC website offers plenty of advice on QPROPS transfers and your pension transfers broker will also give you all the information you need about the process. 

Shop around for an international money transfer broker with years of experience in transferring pensions to a broad spectrum of different countries or choose a broker that is experienced in the country you are emigrating to. Ensure the FCA regulated currency broker is authorized and regulated. They will be aware of the rules and regulations that are specific to that country and ensure a swift and smooth transfer.