Expats can make voluntary contributions of around about £15 a month, which is much cheaper than having to backfill, which costs around £850 per year. This is a major part of a financial plan for expats in the UAE.
When expats first move overseas, they have five years they can pay into a UK pensions pot, but they are restricted to gross contributions of £3,600. Clients can pay in £2,880 because the government will boost it up to £3,600, but this is only for five years.
It is not going to make a massive difference, but if investors do that and have the ability for compound growth, it should be a priority for expats.
Ultimately, expats invest into an unwrapped investment like a general investment account via an international investment platform. But expats must be careful with their UAE-based retirement planning if they intend to return to the UK.
If an expat has invested £500,000 via an GIA offshore and it grows to £1mn, when they return to the UK, they could be liable to capital gains tax on the difference of what they paid in offshore and what the value is now.
The advice we look to give to clients is if your portfolio has gone from £500,0000 to £1mn before you go back to the UK, encash it to the £1mn to take to the UK and there should be no tax due at all – but expats must make sure to get advice.
Future of retirement planning in the UAE
There is a deep mistrust of pensions due to scandals, but things are changing across the UAE in terms of retirement planning for expats. UAE has notoriously been a place for expats to work and go back to their native countries or retire elsewhere.
The UAE government recently brought in the retirement visas to encourage people to retire in the country. Employers across the UAE could do better by hosting pension consultancy sessions and meetings for their employees. Employee benefits in the UAE is not anywhere near as developed as it needs to be.
Accumulation pots and funds are still expensive in the UAE compared to what you would expect to see in the UK and choice of funds is restricted in the existing plans.
But retirement planning for UK expats in the UAE should be a priority. Also any existing UK pensions can be a good wealth transfer tool due to them being free of inheritance tax and are a way of passing money on rather than going out of your way to set up trusts, which can be more complicated and expensive.
