The estimated 350,000 UK expats living in the Gulf are being urged to check that they are not in contravention of the existing Lifetime Allowance (LTA) limit for pensions tax relief.
Chris Ball, Managing Partner of Abu Dhabi-based independent financial advisors Hoxton Capital Management says that with many expats in the UAE working in sectors that traditionally have offered generous pension schemes back in the UK – for example, energy, construction and aviation – they are more likely to be affected by the LTA limit.
People working for oil and gas companies could be the most at risk, adds Ball.
“Just under a third of the people we speak to know what LTA is,” explains Ball. “Those who know what it is are typically aware of where they stand. However, we frequently speak to people in the oil and gas sector who have breached the LTA, some of whom have breached it by substantial margins.”
The Lifetime Allowance places a limit on the level of benefit that can be drawn from a pension scheme without incurring additional tax penalties. This applies to money taken either as a lump sum or as ongoing income during retirement. The current lifetime allowance £1,055,000, though this could rise in line with inflation.
“If an expat finds that they are already in breach of LTA relief, our advice is for them to check if they are eligible for protection,” continues Ball. “If they haven’t paid in to their pension since 6th April 2016 they can apply to increase their LTA limit. Failing this, if they are within the European Union, transferring their pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) could have potential benefits.”
“If, however, an expat is not yet in breach but feels that they could become so, our advice is to stop paying in if they haven’t already done so, and again, if it is a viable option, to look at a QROPS to crystallize the benefits before they are in breach of the LTA,” Ball concludes.
Hoxton Capital Management is an independent financial advisory consultancy providing personal financial advice to expatriate clients living globally. Founded by UK qualified financial advisers, Hoxton Capital Management has offices in London and Abu Dhabi.