free or chained
free to be moved
- Final Salary Company Schemes
- Defined Contribution Company Schemes
- Funded Public Sector Service Schemes
- Personal Pensions
- Protected rights
- Retirement Annuity Contracts (RAC) and s32 buy outs
- Funds in drawdown
chained to the UK
- State pension
- Pension in annuity
- Unfunded Public Sector Service Schemes
Chained – the list is short but it represents
a large number of pensions
The 2014 budget in the UK was a humdinger as it set out the most radical UK pension changes ever. These changes fully came into effect on 6 April 2015. These UK pension changes have affected almost every private or public sector UK pension – this has led many people to ask the question can I move my pension from the UK to a New Zealand QROPS. Previously the only pensions that could not be transferred were the first two categories below, but the budget threw a third and massive category in the mix:
- State pension
- Fund where a pension has been taken as an annuity
- Unfunded Public Sector Service Schemes – the budget category
Cynics say, and we tend to agree, that the reasons that these transfers were stopped is because every transfer was bleeding them dry. Unfunded public sector schemes are the UK governments little ponzi scheme. The reason they are described as unfunded is because there is not a pot of cash supporting the pension payments that are made. Instead all the contributions of the existing members are used to pay for the pensions for the retired members, and the payments to retired members are underwritten by the government (more accurately the tax payer).
If everyone was to stop contributing to these schemes and the government had to pay out the pensions that it has underwritten it would cost them nearly £1trillion. So which schemes are unfunded in the public sector and therefore not be transferred (below is a list of the largest):
- NHS
- Teachers
- Police
- Firefighters
- SPPA
- Royal Mail (old)
- Civil Service
- Armed Forces
The pensions probably account for around 30% of all non-state pensions in the United Kingdom.
Free to be moved to a QROPS
There are still many pensions that can be transferred to a QROPS including:
- Final Salary Company Schemes (often called Defined Benefit Schemes)
- Defined Contribution Company Schemes (often called Money Purchase Schemes)
- Funded Public Sector Service Schemes (e.g. Local Government)
- Personal Pensions including Stakeholder and Group Personal Pension Schemes
- Contracted out of SERPS (Protected rights)
- Retirement Annuity Contracts (RAC) and s32 buy outs
- Funds where income is in drawdown but an annuity has not been taken
How much longer will the freedom last
It is worth noting that when the first draft of the above mentioned legislation came out all final salary and defined benefit schemes in the UK were going to be locked in and therefore unable to be transferred to any QROPS. The initial thinking behind this was to protect the stability of the source the Governments largest bond purchasers – large final salary scheme pension schemes. After much debate the legislation was scaled back to only deal with the unfunded public sector schemes defined above.
With the UK economy still not out of recession it is foreseeable that the legislation could again easily be amended to include these schemes – so it might be a good time to ask should I move my pension. Given the swiftness with which the last set of legislation was introduced it would be prudent for anyone that is holding a final salary pension to review their options.
