Worthwhile "bringing home" British pension assets

Private pension provision
As a result of Brexit, much has been written about the changes in the rules of the game between Switzerland and the United Kingdom. It is encouraging that the transfer of British pension assets to Switzerland can continue to work.
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Written by
Stefano Minuscoli
Client advisor Vested Benefits & 3a

Stefano Minuscoli and Cyrill Habegger  

For many internationally mobile workers, it is a nuisance that they have to draw pensions and pension assets in several countries at the end of their working life. They often express the wish to transfer pension assets earned abroad so that all savings and entitlements are pooled in one social security system when they reach retirement age. However, this is not possible, or only possible to a very limited extent, due to current regulations. The United Kingdom is an exception. Pension assets deposited there - comparable to Swiss pension fund or vested benefit assets - can be transferred tax-free to foreign schemes if they qualify as a "Qualifying Recognised Overseas Pension Scheme", or QROPS for short, and the insured persons meet further requirements.

 

Reasons for the transfer

The possibility of transferring UK pension assets under QROPS is attractive for Swiss nationals who worked in the UK for a number of years and made contributions to a local pension scheme but have since returned to Switzerland. On the other hand, the transfer can be worthwhile for British citizens who settle in Switzerland. Usually, a transfer is intended to eliminate the currency risk, and the withdrawal options (pension/lump sum) are more flexible in the Swiss system. Last but not least, a transfer is tax-efficient. In England, up to 45% tax is due on the credit balance in the event of a payout, whereas the capital withdrawal tax in Switzerland is significantly lower. In this country, there are only two institutions that are considered QROPS. And only one of them is open to the general public, namely the "Independent" vested benefits foundation of PensExpert.

 

This is how it works tax-free

In addition to the QROPS qualification of the Swiss pension foundation by the British tax authorities, other requirements must be met for the transfer to be tax-free:

This list is not exhaustive. Other criteria depend on the personal situation and must be examined individually. The transfer process is relatively complex. In addition, the receiving pension fund must guarantee a ten-year reporting obligation to the British tax authorities, which increases the administrative burden and has cost implications.

 

Transfer to Switzerland is worthwhile

Although the requirements for transferring British pension assets to a QROPS may seem daunting at first glance, the possibility of a transfer to Switzerland should be examined. In addition to the aspects already mentioned (currency risk, taxes), there are other reasons in favour of a transfer. For example, many British pension funds are structured as "defined benefit" plans, which roughly corresponds to our defined benefit plan. In this case, a good return does not directly benefit the insured. In addition, there is a certain risk that the benefits cannot be paid out due to demographic developments - an insured person can therefore lose part or even all of the British pension assets. Therefore, a needs assessment and personal advice is highly recommended for the transfer. 

Written by
Stefano Minuscoli
Client advisor Vested Benefits & 3a