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Mario666

Tax Relief When Withdrawing UK Private Pension

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Hi All,

 

Well more specifically UK members.

 

Due to the increasing political uncertainty in the UK with Brexit, the Election, etc., I am interested in withdrawing as much of my private pension pot as quickly as possible whilst minimising income tax payable. I have a large sum which were I resident in the UK for tax purposes would attract very high levels of income tax if withdrawn in one go. My question is would I be able to claim back the tax which is deducted at source by my pension provider (Standard Life) based on my non-resident status?

 

I have been living in Thailand for approximately 10 years and qualify and am registered with HMRC for non-residency under the UK rules. I have a UK accountant who does my tax return each year. The only income I get in the UK is from rental property which as it is earned in the UK is subject to UK income tax. However, this accountant seems unable to profer a reliable answer to my question and has changed his advice more than once on this subject.

 

I know that the UK has a "Double Taxation Treaty" with Thailand, but believe that tax would only be payable in Thailand if I brought money into the country in the same year in which it was earned (or in this case withdrawn). I do not work in Thailand and have been living here on a Non-Immigrant O Visa based on retirement with extensions of stay each year.

 

My question is would I be able to claim back any tax which my pension company (Standard Life) deducts on withdrawals at source? I do not intend to bring the money to Thailand any time soon particularly with the extremely poor exchange rates we are getting for Sterling currently.

 

Have any of you done this and can anyone suggest a reputable, regulated, preferably UK based expat tax specialist? I know there are many companies who advertise such services, some on TVF from time to time, but often they are not regulated, charge extortionate fees and I have even heard of some people losing all their pensions to fraudulent organisations.

 

There must be several of you in a similar position.

 

Thank you in advance for any help or suggestions you can provide.

 

 

 

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Short answer is no you won’t (I think!).

the UK/ Thailand taxation treaty, in its current form, does not set out any tax treatment guidelines  for private pensions (there is something on civil service and military pensions I believe). Private pensions are outside the scope of the treaty , So the U.K. will apply UK tax rates (and allowances) to a U.K. pension for a Thai based expat. And because there is no applicable treaty between the countries, on private pensions, the U.K. will not allow the payment of gross (untaxed) pension income to a Thai based expat.

you may have grounds for a tax rebate for other reasons, and that is worth looking into, but not because you live in Thailand.

Edited by wordchild
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the first 25% is free of tax, or was for me

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1 hour ago, steve187 said:

the first 25% is free of tax, or was for me

Lump sum 25% tax free. Then you pay 20% over your personal tax allowance which, I think is about £11,800 p.a. Then will go up to a higher % at the next next tax bracket. Which I do not have to worry about!! 5555.

 

PS. I tried looking into non resident, but it is impossoble to understand their convoluted <deleted> paperwork. Asked, please tell me in words of one syllable and got the same response "read the paperwork". T..s..rs!!

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The first thing thing to think about is whether your pension plan benefits from guaranteed annuity rates. If so the pension you would be giving up by cashing in could well equal or exceed any investment income derived by you investing the lump sum yourself certainly on a year by year basis. Your guaranteed annuity rate would be for life of course regardless of world economic recessions etc.

 

Also, when I looked into this a few years ago it transpired that the new pension freedoms had a few strings attached. One of which is if the pension pot has guaranteed annuity rates and/or is more than a certain value you have to produce a certificate from an independent financial consultant before the pension company will release your funds - and of course the industry in the UK have been quick to recognise a cash cow when they see one and you can expect echorbitant fees.

 

If you convert your pension pot into cash it's deemed income arising in the UK & therefore taxable irrespective of your residency status. Depending on the amount involved this could land you with a significant 40% tax exposure. You already complete a UK tax return so I'm assuming you are already using up your personal allowance and possibly some if not all of the basic rate band in which it's doubtful you'd get much back from tax you suffer on the pension pot.

 

Another option is to stage the withdrawals over several tax years tailored so that you don't get hammered at 40% - or any initial 40% deduction is available for refund ( PAYE will apply upon withdrawal).

It could be that a few things may have changed since I last looked at this of course but be wary - you don't want to lose a big chunk of your hard earned to the taxman

 

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It’s my understanding that tax relief is applied to pensions at the time you put it into the pot. 

 

Normal tax rules apply to payments made to you from the pot, ie you can use your annual tax free allowance to offset tax upto the allowance rate.

 

I haven’t read this anywhere (but I have studied the tax rules for non UK residents) and logically if you think about it, the pension funds were invested and tax relief was applied whilst you were working in the UK, therefore taking lump sum drawdowns before the agreed age would be taxed in the same way regardless of where you reside, why would if differ because you were a UK resident when the initial tax relief was already applied.

 

To achieve what you described you could have invested in Isas and offshore pension but then of course no tax relief would have been applied at source.

 

if you could do what you are asking then why would offshore pensions exist?

 

You can’t get tax relief when you both invest and then more tax relief when you draw down unless it’s within the personal annual allowance limit.

 

sorry it’s not the news you probably wanted and id would be happy to be proven wrong.

 

 

 

 

Edited by NightSky
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I moved my Private Pension into a QROP Pension scheme when I became a non UK resident 10 years ago. All these schemes are regulated by HMRC. I took out 25% lump sum a short while ago and paid no UK tax. The biggest advantage of a QROP is that on your demise the pot can be transferred to spouse ,family members or whomsoever you want to benefit and there is no death tax  to pay.

The company I use have proved professional and monitor the performance of my  pension pot closely and I get a 3 monthly report with recommendations. I dont think I can mention the name of the comapny here but I can respond to a PM.

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I have used Fry Group (UK based but with a Singapore office) in the past and found them to be a useful source of advice on offshore pension issues and also note that they have been positively mentioned by other members in similar threads to this one. 

 

 

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Hi Again Guys and thank you for all your responses all of which I agree with.

 

Since posting I asked my accountant to pose the question directly to HMRC, but without mentioning my personal details.

 

He now informs me that I am liable to pay tax on the private pension withdrawals as it is not covered by the Double Taxation Treaty (DTA) with Thailand.....Yes I need a new accountant.

 

It is Standard Life's policy to deduct tax at source....I can't speak for any other pension companies, but Guderian is  right.....They are an absolute pain to deal with.

 

I already withdrew my 25% tax free lump sum a couple of years ago. I did not take the Annuity Route as the annual payments I would receive were so poor....

 

If I stay in Thailand I will probably do as Doowat suggested and just make withdrawals up to the next Tax Band, i.e., £50K currently and pay the 20% tax on the £37,500 (£50k less personal allowance £12,500).

 

However, as mentioned I have been living here over 10 years now and like many others have become disenchanted with many things including the ever changing Visa Requirements which for me being on a non-Immigrant O Visa based on retirement means that my only financial option is the 800K-400K method.

 

I have just turmed 62 so am not even considering what pittance of a Government pension I may ever get which currently I cannot claim until age 67 I believe....That will probably go up again to 70 before I get to draw anything!

 

I have friends living in Vietnam who have lived in LOS previously and all say how much better "most things" are. Also there is no DTA with Vietnam so I will now be exploring that option.

 

That then raises the question of how I get my money out if I want to leave quickly? I have an account with KTB which I never let drop below 1m Thb, bringing over Sterling from the UK via Transferwise.....I have not brought anything over for nearly a year since the exchange rate has been so bad.

 

Hopefully once the Brexit Fiasco is over the Pound may rally even if only slightly as the uncertainty will be gone....Fingers crossed!

 

Thanks again for all your responses and once I get a definitive answer on the tax on pension situation if I decide to move to VN I will update TVF. :thumbsup:

 

   
   

 

 

 

 

 

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I strongly advise you consult a financial adviser. I have just sorted my pension pots out the financial adviser was worth his weight in gold. He told me what choices I had, once I made my decision he took care of everything. I one thing I strongly advise, is to take the maximum tax free lump sum.
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i received 100% from aon formerly Scottish Equitable into my Malta Trust Account

The would not transfer to my Aus Care super due to QROPS rules on aus access before 55 even though i was 57

rather than create a SMSF i did this in Malta then had it paid to aus after a bit of cleaning as cash savings from years as an expat in Singapore

After questioning from ATO they accepted my explanation and tax free 

803k

They will not send it anywhere unless the recipient is a QROPS recognized trust or pension 

I am very lucky

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I think I would talk to Standard Life and ask if they take tax out at source ie when you take the money.

 

I transferred a single amount of more than 23 million baht here from Australia. Income taxes had already been paid. The money went to CitiBank (an American bank) and I had to answer several questions from them before they would release the money. But other than that there were no issues.

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27 minutes ago, Pedrogaz said:

I think I would talk to Standard Life and ask if they take tax out at source ie when you take the money.

 

I transferred a single amount of more than 23 million baht here from Australia. Income taxes had already been paid. The money went to CitiBank (an American bank) and I had to answer several questions from them before they would release the money. But other than that there were no issues.

Thanks for your input.

 

I already withdrew a couple of small amounts to test the water and they had tax deducted at source.

 

I am sure the rules are applied differently in various countries, but my OP was specifically concerning the UK situation.

 

 

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