British expats should maximise value of their pensions

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UK corporate pensions are under stress, so British expats should look for ways to maximise the “take home” value of their pensions. Two representatives of the deVere Group Thailand – Toby Williams, Area Manager, and Glenn Reidie, Senior Consultant – gave a talk about UK pensions at the Sunday, November 9, meeting of the Pattaya City Expats Club. They also touched briefly on two other topics: (1) information for U.S. citizens on the Foreign Account Tax Compliance Act which came into effect in 2010; and (2) strategies for a sustainable retirement income.

Toby Williams has spent the last decade working in the wealth management industry in client facing and management roles, including six years with the deVere Group in Thailand.  Toby specializes in UK pensions, UK pension transfers and portfolio management. For more information on the deVere group, see www.devere-group.com/deVere-News/deVere-in-the-News.aspx.

MC Roy Albiston introduces Toby Williams, Area Manager, and Glenn Reidie, Senior Consultant from the deVere Group Thailand who spoke to PCEC members about UK pensions and some important changes that will take place in early 2015.MC Roy Albiston introduces Toby Williams, Area Manager, and Glenn Reidie, Senior Consultant from the deVere Group Thailand who spoke to PCEC members about UK pensions and some important changes that will take place in early 2015.

Glenn explained that the deVere Group is the world’s largest independent financial advisory firm. It does business in 109 countries (from 84 offices) and has about $10 billion under management. In Thailand, deVere has offices in Bangkok and Pattaya, with 50 expat advisors and coordinators.

Toby described what he termed a “crisis’ in corporate pensions in the UK, where 87% of the defined benefit plans are under funded. Toby said that 15% of the UK’s 7,800 pension schemes have had to take emergency measures. Eleven large blue-chip companies on the London stock exchange have pension liabilities that exceed their market capitalisation. The main reason why so many plans are in trouble, Toby explained, is that returns on investments have been below what was expected when the plans were first designed. About 60% of UK pension plan money is invested in government bonds, not equities, which provide little opportunity for growth. Further, defined contributions plans are in better shape. But, he added, a lot depends on how skillfully the money is invested.

Toby explained there are many factors that “eat away” at one’s UK pension. For example, all pension income is taxed at the UK’s highest marginal tax rate. Also, if the value of the pension is large enough, supplementary taxes are imposed. In addition, if the pensioner passes away and the beneficiary elects to take the pension as a lump sum, there is a 55% “pension death” tax. For expats, there is also a currency risk as Brits living in Thailand know very well having seen the exchange rate of the Thai baht to the British pound go from 55 in 2010 to 43 in 2013.

There are ways for expats to maximise one’s UK pension income, minimise tax and ensure that one’s beneficiaries receive as much of the value of the pension as possible, Toby said. One of the most popular is called QROPS – Qualifying Recognised Overseas Pension Scheme. Essentially, QROPS allows one to transfer one’s frozen corporate UK pension to another jurisdiction – Gibraltar being the most popular one – where the tax rates on pensions is much lower and there are no “pension death” taxes.

Toby described the rules governing QROPS and some changes that will come into effect on 15 April 2015. Not all UK pensioners living abroad would benefit from QROPS, Toby explained. Further, deVere Group provides a service whereby they examine your pension situation and advise whether QROPS would work to your advantage. For a fee, deVere can arrange to transfer a UK pension to a foreign jurisdiction. QROPS cannot be used for all government or state pensions.

Toby Williams with the deVere group Thailand describes the current UK pension crisis and described some opportunities that are open to mitigate high taxes that will affect some UK pensioners if they act now.Toby Williams with the deVere group Thailand describes the current UK pension crisis and described some opportunities that are open to mitigate high taxes that will affect some UK pensioners if they act now.

With respect to strategies to produce sustainable retirement income, Toby said that the goal is to preserve capital and generate decent and steady income. He added that this is not easy to achieve. Portfolios containing multiple asset classes – e.g., property, bonds, annuities, mutual funds and stocks – have performed very well in recent years. Each year, one or two classes will outperform the others, but over time a diversified portfolio produces the best results.

Toby briefly mentioned the USA’s Foreign Account Tax Compliance Act (FATCA) and its impact on foreign investments by Americans. Financial institutions must report accounts held to the US Internal Revenue Service if they are valued at US $50,000 or more. Institutions that are not compliant with the Act can incur penalties in their dealings with US financial systems. Toby said they do have some investment opportunities that might be of interest to Americans, but they are compliant with FACTA and thus subject to the reporting requirements.

After the presentation, Toby and Glenn were interviewed for a television segment by Pattaya Mail TV. This interview is available on You Tube at: https://www. youtube.com/watch?v= 678dkeqbItg&feature= youtu.be.

MC Roy Albiston updated everyone on Club activities and upcoming events and then called on Judith Edmonds to conduct the Open Forum where questions are asked and answered about Expat living in Thailand, especially Pattaya.

For more information on the PCEC’s many activities, visit their website at www.pcecclub.org.

MC Roy Albiston presents the PCEC’s Certificate of Appreciation to Toby Williams, Glenn Reidie, and their able assistant for the interesting and informative talk on UK pensions, the US FACTA requirements, and strategies for a sustainable retirement income.MC Roy Albiston presents the PCEC’s Certificate of Appreciation to Toby Williams, Glenn Reidie, and their able assistant for the interesting and informative talk on UK pensions, the US FACTA requirements, and strategies for a sustainable retirement income.

PMTV’s Paul Strachan interviews Toby William and Glenn Reidie on the porch of the Amari’s Tavern by the Sea Restaurant about their informative presentation to the PCEC.PMTV’s Paul Strachan interviews Toby William and Glenn Reidie on the porch of the Amari’s Tavern by the Sea Restaurant about their informative presentation to the PCEC.