International Pension Plan (IPP) transfer advice
These pension schemes can broadly be broken down into two categories: the sponsoring employer-funded in respect of UK service before 6th April 2006 and those funded similarly in respect of service on or after that date.
IPPs funded before 6th April 2006 are commonly referred to as Pre A-Day International Pension Plans (Pre A-Day IPPs) and are available from age 50, while plans funded on or after that date are often referred to as Post A-Day International Pension Plans (Post A Day IPPs) and are available from age 55.
Most IPPs were funded on a Defined Contribution (DC) basis, which results in members’ pension entitlements being determined by reference to the value of sums and assets held in their respective member account under the pension scheme.
Most IPPs allow members some discretion to select the underlying investments within their member accounts, although this is often restricted to investment opportunities across a limited range of investment funds.
Retirement benefits are generally provided in the form of life annuities, purchased on retirement from an insurance company with the alternative option of commuting the value of that annuity for a cash lump sum.
Retirement benefits become payable at the member’s normal retirement date under the pension scheme or generally from the age of 50 years or earlier cessation of service.
Members who leave the employment of the sponsoring employer before the normal retirement date become “Deferred Members” who remain members of the pension scheme and become entitled to be paid retirement benefits from their normal retirement age or an earlier age (generally 50 years for leavers) as determined by the member. As a general rule, Deferred Members cannot defer taking retirement benefits past their normal retirement date because they are no longer in the service of the sponsoring employer.
Deferred Members may generally transfer the value of their account under the pension scheme to another pension plan of which they are a member, subject to procuring a transfer before their normal retirement date under the pension scheme rules.
The reasons for such a transfer could include, for example:
- The desire to have greater control over the investment decisions concerning their retirement fund
- The ability to defer taking benefits later than that permitted under the pension scheme rules (typically normal retirement date for Deferred Members)
- The desire to take flexi-access drawdown (FAD) pensions from sums and assets comprising the pension fund, as opposed to purchasing a life annuity from an insurance company
- The desire to pass wealth down to future generations
- The tax profile of the country in which the member is resident at the time they draw retirement benefits from the pension scheme.