For many British people April the 6th 2015 represents the date upon which they will be granted significant freedom when it comes to their pension.  From this date forward Brits will no longer have to use their pension to buy an annuity, and in theory they will be able to take their entire pension pot in cash and use it for whatever they want. How will it affect retirement abroad?

As we reported previously, expats planning their future based on this assumption that they will be able to access their entire pension could have a rude awakening.  In part this is because many providers can’t actually offer the option of taking a pension as a lump sum yet.  What’s more, it seems that public sector workers planning retirement abroad could face a real hurdle when April the 6th comes around as well.

This is because these types of workers enjoy defined benefit pension schemes, and from April the 6th these pensions will no longer be transferrable to defined contribution schemes, which could allow for their transfer overseas later.  Additionally, from this date onwards defined benefit schemes won’t be eligible for direct transfer overseas.  Experts are urging all defined benefit pension scheme holders to take advice before it’s too late.

If you’re a nurse, a soldier or a doctor for example, you will likely be in receipt of a defined benefit pension scheme when you come to retire.  These types of pensions are considered highly desirable because pension benefits are linked to salary while a person is working, so they automatically increase as pay rises.

Such a pension entitlement is not dependent on the performance of the stock market or other investments either, and the scheme will often increase pension income each year in line with inflation or by a fixed amount…

However, from April the 6th 2015 the government’s significant pension changes will mean that these types of pensions can’t be transferred abroad into the likes of a QROPS (qualifying recognised overseas pension scheme).

What’s more, they won’t be eligible for transfer into a defined contribution scheme…

This could prove truly restrictive to anyone planning a retirement abroad.  If you believe you may be affected experts are urging you to contact a pension adviser before it is too late.  You have a very narrow window in which to take action – so please reach out for help now before you can no longer have any flexibility with your public sector pension.

Whilst for the vast majority it may make sense to leave your defined benefit pension where it is, anyone in such a scheme who is planning a move abroad sooner rather than later may be far worse off if they don’t take action now.