Being an expat has many potential benefits and opportunities, but residing abroad also brings with it certain complex financial considerations. In many ways these can be made all the more complicated if you also happen to have foreign husband or wife, particularly in regard to your expat pension planning.
Although in most situations having a foreign spouse is unlikely to affect their possible entitlement to your pension in the event of your death, there are many variables that you should consider as an essential part of your expat financial planning.
For example, whether your spouse inherits all, part or none of your private pension will hinge on the nature of the pension fund of which you are a member. As a general rule, the most common types of pension scheme operate in the following way:
- Defined contribution schemes: the ability for you to pass on a defined contribution pension will depend on how you invested it. For example, if you die before you reach 75 and have it invested in a drawdown scheme, the fund could be inherited by your spouse tax-free if you have nominated it to be received in this way.
- Defined benefit schemes: in most cases these pension schemes should allow your foreign spouse to receive your entitlement on your behalf – whether as a lump sum or regular payment. However, there are no guarantees in this regard, so you should check with your wealth manager to ensure that everything is in order.
- Annuities: annuities often seem like a great idea in principle and sometimes they can be – after all they represent a guaranteed income for life. However, annuities are not actually a type of pension but are essentially a type of insurance policy you might decide to purchase with your retirement savings. Whether you are able to pass on an annuity to your spouse will depend on specific terms and conditions.
- SIPPs: A self-invested personal pension fund can be passed on to nominated beneficiaries on your death, including foreign spouses, who then have the freedom to take the fund as a lump sum, as income or as an annuity. In other cases, your spouse might decide to leave it invested in the fund. Furthermore, if your spouse does not exhaust the fund before their death, they can pass it on again to their chosen recipients.
- QROPS: A Qualifying Recognised Overseas Pension Scheme should allow you to pass on the full value of your pension fund to your foreign spouse on death if you die after you reach 75.
The above are purely guidelines and you should always seek advice about your particular chosen scheme either through the provider or by way of your international financial adviser, who will be able to ensure your plans for the future of your retirement savings are structured to suit your specific circumstances and wishes.