What are Global Pension Plans?
Global pension plans are investments designed principally for ex-patriates, who can contribute to the pension plan no matter where in the world they are living.
Global pension plans are generally offshore schemes, maintained in tax-efficient jurisdictions such as Gibraltar or the Isle of Man.
Global pension plans offer those working abroad, or moving from country to country, the opportunity to save for retirement. They can build up a savings fund as part of a pension plan which will have continuity, no matter where they currently reside, or how many times they change location.
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Global Pension Plans or Global Savings Schemes?
There are a number of key differences between global pension plans and UK-based pension plans, however, to the point where some experts would classify a global pension plan as an offshore savings scheme, rather than a pension.
For UK ex-patriates, global pension plans do not attract UK government tax relief, as is available to UK residents in UK-based pension funds. However it is possible, in the case of a UK ex-patriate, to contribute to a UK-based pension plan for their first 5 years of non-UK residence, and then save into a global pension plan after that time. Furthermore, savings from global pension plans can be withdrawn in total, as a lump sum subject to income tax in the UK, while in conventional UK pension plans, 75% of savings must remain in the pension fund. Savings in global pension plans have no requirements attached to them as to how they are used, they can be spent or reinvested as the retiring saver decides, unlike savings in UK pension funds, which must be used to provide a pension income or purchase an annuity.
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For UK ex-pats within the EU, it is possible in the future that new legislation will provide a tax deduction in their country of residence, for contributions to a pension plan set up within the EU.
Global pension plans also do not attract tax relief in the country in which the person is resident. They are offshore investments, and the savings in the plan may become eligible for tax once they are brought onshore, for instance when they are finally accessed for the saver to begin their retirement. This means that for a UK ex-patriate, who wishes to eventually retire back to the UK, their savings in the global pension plan would be taxed as income on retirement. They may take their whole savings fund as a single lump sum, with tax payable on the entire amount. This contrasts with conventional UK-based pension plans, where up to 25% of the pension plan can be taken as a lump sum tax-free.
Global pension plans may offer certain features that facilitate the international lifestyle of their customers. For example, some schemes will accept contributions in sterling, dollar or euro. Contributions may be made not only in cash, as some schemes accept a wide range of other assets as well.
Global pension plans offer various options upon retirement. Savings can be taken as a single lump sum, or used to purchase an annuity, or used to directly provide a regular or irregular pension.
Global pension plans are available as regular savings plans aimed at individuals. Global pension plans are also available as group savings schemes, to employers wishing to provide benefits to their international employees.
