For many Poles who have returned home after living in the UK, one of the big questions involves what to do with any UK pension benefits that have been accumulated while away.
This dilemma is even more pertinent in the light of Brexit and the additional uncertainty that it brings to the table.
Firstly, unfortunately, the answer to the question of whether you can transfer your UK pension to a Polish domiciled scheme, is, no you can’t.
However, this does not end your options. For anyone who has returned to Poland and has a UK pension, there are 3 potential courses of action open:
1. Do nothing
That’s right, leave your pension where it is (although it would still be worth reviewing any funds that you may hold within your pension to make sure that they are in line with your objectives and risk profile).
Certainly, if your pension is a defined benefit/final salary scheme, there may be very good reasons for leaving it where it is.
At the very least, you should be fully aware of the benefits available through your current scheme before considering giving them up.
2. International SIPP (Self Invested Personal Pension)
A SIPP is a pension scheme that is established under trust in the UK.
It allows you to accept the cash equivalent transfer value (CETV) from a defined benefit scheme as well as consolidate a number of smaller schemes.
Some of the benefits of transferring your pension to such a structure are as follows:
- You have flexibility in terms of how your pension is invested
- You have the option to hold your pension in a currency that is more closely matched to your future expenses and liabilities (e.g. EUR)
- You have flexibility in terms of how pension income and lump sums are withdrawn (from minimum pension age of 55)
- You potentially have greater flexibility to decide who will be nominated as beneficiaries under your pension
3. Qualifying Recognized Overseas Pension Scheme (QROPS)
Unlike a SIPP, a QROPS will not be governed in the UK. Instead, it will be set up in a jurisdiction such as Malta, Isle of Man or Gibraltar.
The benefits of using a QROPS for long term residents of Poland are largely similar to those of a SIPP (see above), although often the running costs will be higher.
One identifiable benefit of a QROPS over the SIPP option is that payments made from a SIPP will typically be in Sterling, whereas with a QROPS you could have them paid in Euro. This is likely to be a better option if your future liabilities and expenses are in Poland as there is a much closer correlation between PLN and EUR than PLN and GBP.
Also, if you are concerned about the implications of Brexit, then moving your pension outside of the UK, may give you some peace of mind (please read this post).
However, it is important that you understand the implications of any Double Taxation Treaty (DTT) between Poland and the country in which your QROPS is/will be located; in some cases they are less favourable than the DTT between the UK and Poland.
Finally, as Poland is an EU country, you will avoid the Overseas Transfer Charge, as long as the QROPS that you transfer to is also in an EU country.
At the end of the day, whether a UK Pension Transfer for you as a Polish resident is the best course of action or not, will be dependent upon your individual circumstances and specific financial plans.