QROPS Advice: Expats Pension Defeat Highlight Importance of Advice

The defeat for the UK state pensioners in the European Court of Human Rights has highlighted the importance of getting sound financial advice when moving between jurisdictions.
The pensioners had their pensions frozen when they moved abroad and they have not been raised in line with increases for their counterparts in the UK. Financial advice may have averted this situation say advisers such as Blacktower Financial Management’s John Westwood.

“It again emphasises the fact that if people are going to leave the UK they do absolutely need to sit down and take some proper advice, preferably before they leave the UK, on their future and intended retirement planning,” said Westwood.

“So often these things are left and are not properly addressed until it is too late and what we are seeing now is expatriates living throughout Europe who are suffering badly because of sterling versus euro conversion rates. We are seeing hardship and unfortunately this only re-emphasises the point that anyone planning to move abroad must and should seek solid and quality financial advice before they make any decision.”

AES International’s Sam Instone echoes Westwood’s concerns and says although this will not put people off moving abroad in retirement, as this is invariably a lifestyle choice, consumers need to fully understand the different options available to them in different countries.

“People need to understand what benefits they are effectively giving up when they move abroad and how they will be treated by the UK government’s pension and benefit laws in different countries,” said Instone.

“Unfortunately people time and again underestimate how much they will need in their retirement and will often end up, despite starting off living the lifestyle they desire, in fairly dire straits. This is particularly the case when proper financial advice is not taken.”

Westwood also doubts whether this ruling will make people reconsider moving abroad as the decision is usually influenced by other factors rather than just for financial motives.

“I do not think people will reconsider. The decision to move abroad is based on a number of factors and it is not just “how big is my pension going to be” there is a whole catalogue of lifestyle issues that are being considered, including family and of course employment issues,” added Westwood.

“It depends on how the retiree views their time horizons – if they view the move abroad as a permanent move as long-term lifestyle option then they should consider the feasibility of removing the pension fund into an international contract, allowing more flexibility and the ability to match currencies versus income and mitigate certain unwanted taxes as well - for example, a QROPS or that type of plan.”