EMMIGRATION

[Testingtheseatlimit2]

I have a mate.......... who is considering emmigration. Is there anyone out there who has any experience of what happens to your Armed Forces Pension should you decide to move out of Europe? I have heard various rumours of double taxation, frozen rates etc. Just being lazy, but if anyone could help it would be much appreciated. No rush by the way!

[South Bound]

I have a mate too...told me that some places (far far away) will tax you again on your pension, but you claim it back through your annual tax return over there. Still taxed at 22% over here (asuming you have no other financial interests) and you only end up paying more if the new place's rate of tax is greater than that....

Think that is what he said anyway....

[Testingtheseatlimit2]

Thanks Southbound, I'll let him know!

[Army Mover]

I emigrated to Holland when I left the Army, the pension was taxed by the UK at source and again by the Dutch but they do (or did, this was 12 years ago) allow you to deduct the tax already paid because there is a double taxation agreement in place - but the Dutch income tax rate was only 3%, the other 27% is made up of all different kinds of "fonds" which are not deductable - end result was I got hammered by the Dutch taxman.

I've since moved back to the UK.

[N Arslow]

If you are non-resident in UK then they should leave it alone - where you go to live is another story of course - In Canada, for example, they tax you on your world wide income:{

[Not Long Here]

South bound is quite correct. However, there are various options open to you after discussion with the UK taxman.

You can either leave your pension paid in the UK and taxed accordingly but as S'bound says if the tax rate is greater in the country you are going to you will pay the diff to the taxman in that country. Also you have to go through a fairly complex process of looking at the monthly amounts against the approved exchange rate when you do your tax return in the non-UK country.

Alternatively, if that pension is now your only UK income, the taxman if in a good mood can tell Paymaster not to tax the pension. At that point Paymaster can be instructed by you to transfer the pension monthly to an off shore account. You are still liable for the offshore tax but you can invest the unpaid tax until its due.

You also have the ability, even if still paying tax in the UK, to have your pension converted into the currency you wish and sent to an account in the country of domicile.

Just to knock another urban myth on its head -- your Military Pension is index linked from the age of 55 even if you are not in the country. It is only the Government OAP that is not index-linked.

Hope that helps

PM if you need more info

[ScorchedSue]

If you are non-resident in UK then they should leave it alone - where you go to live is another story of course - In Canada, for example, they tax you on your world wide income:{

Quite funny actually.

In Canada they tax you on the sweat on your gonads.

That socialist country loves to have folks arrive with guaranteed pension money - it is a tax mans dream come true.

Top level income tax is about 50-54% if memory serves - not counting value added taxes and provincial taxes you pay at the counter.

Sorry for the thread steal. Outa' here.

[Pontius Navigator]

I read that your Government earned pension is taxed in UK at source.

Your state pension OTOH can be taxed at either end. I was not aware that you could get your UK pension tax free.

As all your pensions are inded at UK cost of living, you should ensure that you emigrate to a low COL country. The £200 annual fuel payment goes a long way in Spain.:)

[Aynayda Pizaqvick]

From what I remember, if you move to the antipodes then your pension is frozen at the rate at which you left the country. If that is the case then I'd imagine your pension wouldn't go far in another 20 years or so. I'm not sure but this may apply to other commonwealth countries also, but either way it is a massive kick in the gonads!!!

[Pontius Navigator]

AP, fortunately that rule only applies to State pension not service pension. AFAIK the state pension is frozen in all the commonwealth countries. P*ss*r.

[allan907]

You can opt to have your pension taxed at UK rate by Inland Revenue or taxed in your new country. Military pensions have to be paid into a UK bank account (I think). A really sneaky person might open an offshore bank account in the Isle of Man or Channel Islands and might not declare it to the new country. Mind you, most tax authorities have sneaky ways of making banks and government departments talk nowadays and if you are caught then the resulting tax bill can be quite horrendous.

One tip which is worth passing on - open a foreign currency account with your offshore bank (currency of your country of choice) and shift money from your sterling account to your foreign currency account to take full advantage of any favourable currency exchange rates. Try and shift money to your local foreign account as few times as possible 'cos the banks charge an arm and a leg to move money. I try to do it annually.

[Pontius Navigator]

Allan907,

<<One tip which is worth passing on - open a foreign currency account with your offshore bank (currency of your country of choice) and shift money from your sterling account to your foreign currency account to take full advantage of any favourable currency exchange rates. Try and shift money to your local foreign account as few times as possible 'cos the banks charge an arm and a leg to move money. I try to do it annually.>>

I know where you are coming with this one and of course it applies as you have already escaped. On that basis the advice is sound. There is not, however a need to switch to an offshore account.

Given an annual input of £20000 you are looking at a tax free income of only about £5-700 max. Simply open two accounts. One for you, one for her. Get paid in yours transfer it to her's. Bingo no tax.

~~~~~~~~~~

If money is placed offshore, such as Jersey, it should have been declared to GB (Gordon not Great). True the money would have earned income tax free and you would have held on to the interest for about 8 months, but at the sums we are talking about, say £100k in gratuity - interest £5000, tax £1000, interest on the tax 8 months at 5% - £34 was it worth it? Add a couple of noughts in along the line and lots of stinking rich did, especially as the tax would have been £2000 and the gain £68.

Anyway, door shut.

Gordon put the frighteners on Barclay's Bank and they have had to reveal all the interest paid to UK residents in their offshore accounts. From memory something like 20% had declared interest and only 2% actually paid any tax.

Blood and stone spring to mind. My father, 50 years ago, used to moad about being taxed on money going in to his pension pot and savings and then being taxed on the money he took out later. Double taxation indeed.

Do it in property, do it in valuables, Gordon will still be there with the begging bowl.

[cazatou]

HMG reserves the right to tax what it calls "Government Pensions" in the UK irrespective of where you reside on this Planet. The Military Pension is just one example of a "Government Pension". My Wife was in Education and her Pension is also classed as a "Government Pension" as are ex members of the Civil Service, Police etc.

The State Old Age Pension will continue to be index linked providing there is a bi-lateral treaty between HMG and your new Country of residence - eg such a treaty applies to all EEC Countries.

Suggest you talk to Paymaster (01293 604057) re Military Pension and the State Pensions people in Newcastle (details from your local Jobcentre).

PS Only one "M"in emigration.

[jindabyne]

Bilateral, not bi-lateral -----

[gonesurfin]

My pension is now paid into a UK building society, I then use the associated credit card to transfer funds to my US bank account. There are no fees from either end and the exchange rate is highly favourable. I think the limit is $2500 a day. I wouldn't recommend messing around with the tax boys....in either country!

Beers.

[allan907]

Pontius You misunderstood me. What I was advocating was maintaining a (legal) foreign currency account with one of the "Big 4" offshore branches. Then when currency exchange rates are favourable transfer a sum from your sterling account to the foreign currency account. That way one can convert sterling to your local currency at the most favourable rate and transfer to your 'in country' account at a time of your choosing when the exchange rate might not be so favourable. All legit and declarable - but advantageous.

[Not Long Here]

Ref above, definately the way to go. For example, I was taxed on my UK pension with exchange rates of 2.40 to 2.80 but didn't actually send the money across.

Now the rate is nearer to 3.00 I have just transferred a wad across. All totally legal. You don't need an offshore account either. I used my standard Uk account and my NZ account. There are many online brokers who will give rates better than the high street banks and far lower commission.

[Pontius Navigator]

Allan907, no, I didn't misunderstand at all. I know where you are and what you do it legit. I was just emphasising the point that it is a scheme to bring money to you as you are already domiciled abroad and not a device to send money abroad if you are UK domiciled as many in this thread currently are.

As far as tax on interest goes, I imagine you need to declare it for tax purposes annual regardless of whether ypu repatriate any money that year.

[gonesurfin]

Don't forget you can reduce your NI contributions and still be entitled to a full pension. Information on paying voluntary contributions can be found in leaflet NI38. I think you can access this document from:
www.hmrc.gov.uk/leaflets/nic.htm (http://www.hmrc.gov.uk/leaflets/nic.htm)
Pages 13/14 of this leaflet explain the conditions that you must meet to pay at class 2 rate. If you are not employed/self-employed abroad, then you must pay at the class 3 rate.

Beers.

[allan907]

Pontius Correct. Annual pension is declared on my Aussie tax return and they convert it at whatever the mean rate is (I think).

Today the exchange rate has shot up from 2.40 to 2.46 to the quid so, courtesy of telephone (instant) banking I've just transferred 8,200 quid to my $ account and will bring it over when I'm good and ready (probably when the rate has dropped to 2.30 or so!)

[Oggin Dodger]

I too have a mate who's thinking of jumping ship - thanks for all the info, I'll make sure sure he gets it.
:ok: