Brits working for oil and gas companies in the Middle East are among those most at risk of incurring additional tax for putting aside more money for their retirement than the current lifetime allowance permits.
Advisory firm Hoxton Capital Management has warned that the roughly 350,000 UK expats living in the Gulf region need to “check that they are not in contravention of the existing lifetime allowance (LTA)”.
Managing partner Chris Ball said those working in sectors that offer generous pension schemes back in the UK – energy, construction, aviation etc – are more likely to be affected.
“Just under a third of people we speak to know what LTA is,” Ball said. “Those who know what it is are typically aware of where they stand.
“However, we frequently speak to people in the oil and gas sector who have breached the LTA, some of whom have breached it by substantial margins.”
Changing the goalposts
The LTA is currently £1,055,000 ($1.4m, €1.2m), having been £1.8m at its peak in 2011/12.
It was periodically cut to £1m by 2016/17; but will, under current plans, rise by the consumer price index (CPI) every year from 2018/19.
“If an expat finds that they are already in breach of LTA relief, our advice is for them to check if they are eligible for protection,” Ball said.
As reported recently by International Adviser, there are two types of protection that can lock-in a saver’s LTA to the more generous 2016 limit of £1.25m.
There is also the enhanced protection for non-UK residents. Individuals are eligible where they have worked or lived overseas since 2006 and their employer has made contributions to a UK pension – for which they didn’t receive any tax relief.
“Failing this, if they are within the European Union, transferring their pension to a qualifying recognised overseas pension scheme (Qrops) could have potential benefits.
“If, however, an expat is not yet in breach but feels that they could become so, our advice is to stop paying in if they haven’t already done so; and again, if it is a viable option, look at a Qrops to crystalise the benefits before they are in breach of the LTA,” Ball added.
Hoxton was set up by former DeVere duo Ball and Matt Dean in 2018 and provides advice across the UAE through a Fujairah free zone investment consultancy licence.
This article has been updated to include information about enhanced protection.