Are you in a UK public sector defined benefit pension scheme? If so you have less than 10 months if you wish to transfer it.
Why? The government is removing the right to transfer from public sector Defined Benefit schemes to Defined contribution arrangements.
Experts say the move is designed to prevent large numbers of public sector workers ditching their DB scheme in favour of a defined contribution arrangement after Osborne announced a radical overhaul of the UK pensions framework earlier this year. The reforms, which will take effect from April 2015, will allow anyone who is aged 55 or over to take their entire pension fund as cash.
But alongside these changes the Government is intending to introduce legislation to remove the option to transfer for those in public sector schemes, The Armed Forces, NHS, Civil service Firefighters, the Police and Teachers all fall under this bracket.
The freedoms being offered to UK pensions are generally being welcomed, but for expats, they could have an impact on using a Qualifying Recognized Overseas Pension Scheme as any expat considering moving their pension overseas now has even more to think about.
So why are the government imposing this restriction? Well, for public service defined benefit schemes, this could represent a significant cost to the taxpayer, as these schemes are largely unfunded.
The thinking behind this change is allowing such transfers could affect the wider economy. Funded defined benefit schemes play an important role in funding long-term investment in the UK economy, which the government does not want to put at risk by large numbers of public sector workers transferring out.
So even though reforms will mean that hundreds of thousands of people retiring each year will now have the freedom to take savings built up in a defined contribution scheme as one cash lump sum (subject to a marginal rate of tax) It seems overwhelmingly probable following the chancellors budget that those in public sector schemes will not be allowed to transfer out to a defined contribution scheme.
Furthermore, the consultation document proposes that the private sector may well be treated in the same way as the public sector, with either a disallowance of the ability to transfer out, or restrictions upon it; Although prohibition is unlikely, there may well be restrictions placed upon transferring out here too.
This makes transferring out of Deferred Benefits, for public sector workers, extremely important at this juncture.
The ban will, for example, prevent any military personnel who decide to retire overseas from taking their pension with them to their new country, which exposes them to currency risk as payments need to be transferred from sterling to the local currency with effect from April 2015.
Of course, It is imperative that all factors are taken into consideration when deciding whether to transfer out of a scheme but anyone looking to make the move only has until April 2015 to transfer before the new legislation banning transfers for unfunded schemes comes into effect. So, if you fall into the public sector bracket and want to know how the new rules will affect you and your pension, you need to act fast.
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