Those retirees who choose to retire abroad can now take their pension scheme with them and don’t actually need to purchase an annuity now, all thanks for new rules on overseas pensions.
Over 400,000 people retire abroad from the UK and now they can pack up their pension too and take it with them in cash.
Currently, you can take quarter of your pension in a tax free lump sum but then you have to use the rest to buy an annuity. Annuities are often a good idea as they guarantee your pension income no matter how long you live, but many people are unsure about what makes a good annuity and when is a good time to buy them. Some people hang on, hoping for a better annuity rate but the problem then is that if you reach the age of 75 and still think it’s not the right time, then you are forced to buy an annuity – you can’t wait until you’re older.
Many people also get a poor deal on their annuity purchase because they think they have to buy it from their pension provider, which is not true. You are able to exercise what is called your ‘open market option’, which means you can shop around.
Another disadvantage is that some pension providers are quicker than others when it comes to arranging the annuity paperwork.
Offshore pensions are often far more lenient and the Isle of Man has now introduced similar rulings, meaning you don’t have to buy an annuity at all.
However, although these disadvantages do mean that it could be tempting not to buy an annuity at all, you need to weigh up what you would do if you were to run out of cash. An annuity does take that worry away. You need to be sure of all your options so be sure to shop around for the best annuity rate and to inform the provider of any health issues, as they will take this into account when calculating the annuity payments.
