With immigration numbers increasing at a staggering rate and Portugal consistently topping ‘best places to retire’ lists, the country’s popularity for a desirable lifestyle is undeniable.
An enjoyable retirement, however, takes financial prudence and careful planning over many years to attain.
The golden rule is to start saving early and implement responsible spending habits on a long-term basis and ensure that you remove as many financial burdens from your future as possible.
It is also fundamental to consider the best strategy for your pension.
If you are living in Portugal, you have three options available to you when it comes to claiming your pension.
Leaving your UK pension behind
If you make the decision to leave your funds behind in the UK, you could be subject to year on year pension reforms that you have no control over, post-Brexit, as changes to UK pension regulations are frequent.
It is commonplace for funds to be held in GBP, which creates a potential future currency risk for those who decide to retire abroad.
There is also very limited control of investments and restricted growth options.
Self-Invested Personal Pension (SIPP)
A Self Invested Personal Pension (SIPP) is a pension that offers more flexibility with the investments that you can choose from.
A SIPP is a great option for UK expats living abroad and allows a saver to pool pensions into a single pot either before or after retirement so they can later draw income from it.
The greater levels of freedom that come with SIPPs make them an ideal retirement saving vehicle for those who are comfortable with the idea of an actively managed fund which will make their money work for them.
If you hold a SIPP, you will be able to access any funds from the age of 55, while up to 25% of the fund can be withdrawn as a cash lump sum, which would be tax-free to a UK resident.
Qualifying Recognised Overseas Pension Scheme (QROPS)
A QROPS is an international pension scheme which is based in a jurisdiction outside of the UK but still registered with HMRC. A QROPS is one option available to expatriates as a way of transferring the UK pension benefits when they relocate to another country such as for retirement.
QROPS can offer certain benefits to deferred scheme members who wish to transfer their pensions abroad. Some of the major advantages of a QROPS are that you can control the timing and amount of any income and Pension Commencement Lump Sum (PCLS) that you draw from your fund.
You can also pass the value of your pension fund to your beneficiaries when you die, and protect your retirement income from currency fluctuations.
There are pros and cons of each option available, so seeking expertise from a qualified adviser will help you to weigh up the best strategy for you when it comes to your pension.
The UK has committed to continue yearly cost of living increases to state pension payments for retired UK citizens living in the EU post Brexit.
However is also possible following Brexit that the UK could widen the taxation net, or change rules to make it harder to transfer UK personal pensions.
Very importantly some UK banks have announced that they will be closing all EU resident’s Accounts. If you have a UK bank account and you are no longer living in the UK, I highly recommend that you check with your bank so that you do not have any unpleasant surprises.
On the 31 December the transition period ends and full Brexit begins, with the UK no longer bound by EU rules, time is running out.
It goes without saying that the cornerstone of any retirement plan is expert financial advice, to help you navigate complicated decisions and leave you to enjoy your golden years safe in the knowledge that your finances are in good hands.
Nothing in this article is meant as an invitation or inducement to invest in the products mentioned. You should always seek advice from a qualified financial adviser who will look at whether these products are right for your personal circumstances.
Manuela Robinson is the Joint-Country Manager of Blacktower in Portugal.
With offices in Quinta do Lago and Cascais.
Manuela.Robinson@blacktowerfm.com | (+351) 912 273 807
Blacktower Financial Management