UnaVida | Tax Free Pension?

Tax Free Pension?

Tax Free Pension – George Osborne’s startling changes to pensions in 2015 heralded the year of “pension freedoms” in the UK, and whilst you can take your entire pension pot now, you could be stuck on an “emergency” tax code meaning you pay up to 45% income tax on your entire pension pot.

Even if you do not want to take all of the monies out and simply take an income then you will be paying tax at whatever your marginal tax rate is. Wouldn’t it be nice if you could extract your pension tax free ?

British pensioners who want to buy another house for their kids or as an investment may make an even poorer choice.

Pensioners will get hit by their highest rate of income tax which could be up to 45%. They will then pay income tax on their rental income, they will pay up to 28% capital gains tax on any increase in the value of that property, they will pay stamp duty when they buy the house and their money is now part of their estate which means they will pay 40% tax on death if they are above their IHT allowance threshold.

Unless you move to sunny Portugal.

Portugal has new laws which mean if you are not previously a resident, you can move to Portugal and there is no income tax on pensions for the first 10 years you stay there.

That is great, but you may still pay tax in the UK on death after 75. So if you were to survive until that age, after enjoying ten years of tax deducted income – your family could see a further tax bill upon death.

Furthermore taking monies out of your pension means that (if not spent) then once monies are outside of your pension then the monies become part of your estate. So, if you take all your pension monies out in the first 10 years, suddenly your whole pension pot becomes part of what was formerly death duties (Inheritance Tax) . That is because, you are taxed on your worldwide bank accounts, pensions, funds, property and other assets on death if you are a British national. It is very difficult to become non-domicile and means cutting all ties with the UK.

But, is there a way to make your pension last longer, avoid all UK taxes and retire by the beach with clear blue skies and fresh air? You would think that is too good to be true, but the answer lies in moving to Portugal.

Because as we stated before :

Portugal has new laws which mean if you are not previously a resident, you can move to Portugal and there is no income tax on pensions for the first 10 years you stay there.

Registered in England and Wales. Registered Number 5553273.
Registered Address: 8f Millars Brook, Molly Millars Lane, Wokingham, Berkshire, RG41 2AD.

A pension is a long-term investment that typically cannot be accessed until age 55 (57 from April 2028). The level of pension benefits offered could change depending on the value of your investments (and any income they may generate).

The interest rates in effect at the time you begin receiving benefits may also have an impact on your pension income. The tax consequences of pension withdrawals will depend on your unique situation. In later Finance Acts, tax rates, tax bases, and tax relief may change.

The opinions expressed by Ray Best are meant to inform and educate. Before making any investment decisions always take advice that is pertinent to your investment personality and financial situation.

You are aware that past performance will not necessarily be repeated in the future, but you should be aware that persistent poor performance invariably will.

The value of an investment and the income from it could go down as well as up.

The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

UnaVida Wealth Management Ltd. is directly authorised and regulated by the Financial Conduct Authority (440577).

The guidance in this website is primarily aimed at a UK audience and is subject to regulation by the Financial Conduct Authority (FCA).

The Financial Conduct Authority does not regulate tax planning, estate planning, or wills and any form of legal documentation.