Two thirds of UK expats could be in breach of pensions tax regulations

The estimated 350,000 UK expats living in the Gulf are being urged to ensure they are not in breach of the existing lifetime allowance (LTA) limit for pensions tax relief.

According to Hoxton Capital Management managing partner Chris Ball, those expats in the United Arab Emirates (UAE) working in sectors that have traditionally offered generous pension schemes in the UK, such as construction, energy and aviation, are more likely be affected by the LTA limit. Ball added that those employed by oil and gas companies could be the most at risk.

He said: “Just under a third of the people we speak to know what LTA is. Those who know what it is are typically aware of where they stand. However, we frequently speak to people in the oil and gas sector who have breached the LTA, some of whom have breached it by substantial margins.”

Ball has urged those already in breach of the LTA to check if they are eligible for protection, as those that have not contributed towards their pension since 6 April 2016 can apply to increase their LTA limit. However, failing this, if they are within the European Union, transferring their pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) which could have potential benefits.

“If, however, an expat is not yet in breach but feels that they could become so, our advice is to stop paying in if they haven’t already done so, and again, if it is a viable option, to look at a QROPS to crystallize the benefits before they are in breach of the LTA,” Ball concludes.

The LTA places a limit on the level of benefit that can be drawn from a pension scheme without incurring additional tax penalties. It applies to funds that are either taken as a lump sum or as ongoing income during retirement. The current LTA is just over £1.05m, though this figure could rise in line with inflation.

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