Vista Financial Management has established a Cyprus presence in conjunction with Cyprus-regulated 3D Global. The office is run by John Hilton, who specialises in advising British clients retiring or already retired there about their retirement options.

UK PENSION OPTIONS EXPLAINED

Benefits from UK pensions not already in payment can be taken at any time between ages 55 (50 until 5th April 2010) and 75. It is worth investigating all your options before making a final decision. Do not assume that because you have been with a provider for the last 20 years they can offer you the best deal.

Access to Tax free Capital
Access to the tax free cash element of a pension is of interest to most pension holders. If income is required you have basically two choices - a secured income in the form of an annuity or an unsecured income via a drawdown arrangement.

Annuities
The main benefit of an annuity is that it provides a guaranteed (secured) income for life – you know what you will receive and when you will receive it. People who are risk-averse would be advised to consider the various annuity options.

Many pension holders do not like annuities because rates have fallen over the years. But rates need to be considered in context: they were indeed higher 15 years ago but inflation was higher too and so were bank deposit rates. With the drop in inflation came lower annuity and bank deposit rates. Relatively speaking conventional annuity rates have changed little and are comparable to 15-year UK government bond yields.

The amount of money you receive from an annuity will depend on your health amongst other things What may surprise some people is that smokers will usually get better rates than non-smokers and men will normally receive more than women of the same age. A person with a history of medical problems could benefit from enhanced terms, possibly by as much as a 40% increase compared with standard terms. So it’s worth shopping around to find out what’s on offer.

Drawdown
Drawdown is simply another income option. The main difference is that the income from a drawdown arrangement is not guaranteed. In this case, the pension fund remains invested with a view to providing better returns in the long term. Given that an annuity will provide bond-type returns (and no risk), it is usually necessary in drawdown to take a higher level of risk in order to achieve this higher return. This typically means investing in assets such as commercial property and stocks.

For drawdown to be a practical option you need to be comfortable with the additional risk and preferably have other sources of income should the investment strategy go wrong. 

QROPS
The above options are available to UK residents and non-residents. There is another pension alternative, known as a Qualifying Recognised Overseas Pension Scheme (QROPS) that can provide additional benefits to non-UK residents.

QROPS are very flexible and are approved by HMRC (Her Majesty’s Revenue and Customs) but they are run from outside the UK and benefit from some distinct advantages for the non-UK resident.

Firstly, QROPS allow the underlying investments to be managed to achieve growth in Euros rather than Sterling.

Secondly, should the pension-holder die whilst in drawdown, his dependants will suffer a 35% tax charge on the balance of his investments if the lump sum death benefit option is taken. This is not the case with a QROPS, providing you have been overseas for more than 5 complete tax years.

Thirdly, with a UK pension scheme an annuity (or a limited form of drawdown called Alternatively Secured Pension) must be taken by age 75. Again providing the above 5 year condition is met, a QROPS scheme does not have this restriction. In practice, this leaves the pension holder with a far wider range of options for passing assets to future generations.

WHAT TO DO NEXT?

John is a UK pensions specialist living in Cyprus. UK pensions are complex and this page only scratches the surface of the subject. To find out more about your options, contact John on john.hilton@vfmg.co.uk, giving your date of birth, total value of your pension fund (approx.) and any specific questions or comments, or phone him on 00357 97734461. 

Vista Financial Management Limited is an appointed representative of Sense Network Limited, which is authorised and regulated by the Financial Services Authority. Company Registered in England No. 6850561. Registered office as above.
 
3D Global Financial Services Ltd is an Investment Firm regulated by the Cyprus SEC (reg 063/06); 3D Global Insurance Advisors Agents and Sub-Agents is an insurance mediation company regulated by the Cyprus ICCS (reg 1941 and FOS4). www.3dglobal.com