Pension and savings plans provide plenty of choices as more retirees opt for life overseas

More and more people are finding it difficult enough just to pay monthly bills and put food on the table without having to consider putting money aside for the future so they can enjoy a comfortable lifestyle after retirement.

A survey carried out by Expert Pension Claims revealed that from 2,000 residents across England, Scotland and Wales, a total of 47.6% said one of their main pension concerns was that they wouldn’t have enough money to last them through retirement. Yet planning for the future does not seem to be a popular option with young people across the UK with figures from the Office for National Statistics (ONS) showing that more than half of 22 to 29 year olds in the UK have no savings at all.

With a raft of different pension plans and saving schemes to choose from, it can be a job in itself deciding how best to protect your precious earnings – and these days many folk are changing their approach to planning a secure financial future.

Pensions have become more flexible in recent years and the UK government’s auto-enrolment scheme is well established now so employees benefit from employer contributions and tax relief. In essence this is a popular choice with many viewing it as the best way to put hard earned cash aside for retirement years as you are effectively receiving free money from your employers.

Private pensions are another option, as are savings account with many people opting to put money into an ISA (Individual Savings Account).

A clear benefit of having a private pension scheme rather than an ISA is tax benefit as your pension provider can claim the tax back on your contributions. So if you are paying tax at a basic rate, for every £100 you contribute, you are actually contributing £125 to your pension. Paying a higher tax rate still means you can claim the money back on your tax return.

Of course, after retirement, you have to pay tax on your pension payments in the same way as your employment income, but as you will likely be drawing a lower pension payment than your employment you may fall under the tax threshold anyway.

A pension scheme also means that if you are ever hit by redundancy or made unemployed, your pension contributions will not affect your entitlement to certain state benefits like Job Seekers Allowance and Universal Credit.  An ISA does count towards your savings and may affect your entitlement to means-tested welfare funds.

There are some plus points to putting your money into an ISA. Accessibility being one of those advantages whereby you can take money out of your savings account whenever you like, whereas you cannot withdraw funds from your state pension until you are 55 in the UK. You could also withdraw a lump sum – while this is now allowed with pensions, any amount above 25% of your total pension in a tax year will be taxed. Finally, you can also have an ISA alongside a pension which also gives you more flexibility.

Yet there are pension options for everyone with some more attractive than others. Figures from the Office for National Statistics, 26% (207,300) of the 784,900 British citizens living in the EU are aged 65 and over. More and more people are retiring early and deciding to move abroad but where does this leave their UK pension fund once they leave the British Isles?

Recent retirees seeking to widen their horizons and move to foreign lands have a couple of options when it comes to their pension nest egg. They can leave their pensions in a UK savings pot and take the money from abroad; or alternatively they can transfer pension savings to a ‘qualifying recognised overseas pension scheme’ (QROPS). Changes to pension legislation in recent years has meant Brits no longer have to pay heavy tax on transferring pensions abroad making it a far more attractive option for many.

If it’s not a QROPS scheme however, your UK pension scheme may refuse to make the transfer, or you’ll have to pay at least a hefty 40% tax on the transfer. Yet, even if you aren’t registered under the state pension scheme, if you are British and have a corporate, stakeholder, personal, or another pension scheme, you can still look into the option of transferring your arrangements overseas.

So for pensioners wishing to move abroad, a QROPS allows much better freedom of movement for thousands wishing to live out their days in the sun. With over 1.5 million expat Brits estimated to be living in the USA, the figures may well continue to rise in the years to come.