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Drawing an Early Pension

Research from Scottish Widows recently found that most high-rate taxpayers were thinking of emigrating to a warmer climate on retirement and this trend is expected to increase. If you dream of a life in stress-free Bulgaria but are hanging on until you reach retirement age, think again.

New offshore pension funds now allow expats who have lived abroad permanently for the last five years to draw their pension at any age. Quest Bulgaria explains how.

Offshore pension schemes are hailed as the next big thing in pension planning. Taking out such a plan will enable anyone who lives abroad permanently for a period of five years to avoid high pension taxes and the compulsory purchase of annuities.

Already, the Isle of Man has introduced new pension regulations for its pensions, which allow increased tax-free lump sums, a low rate of inheritance tax and exemptions from annuities as well as the ability to invest in residential property.

Hong Kong, Singapore and the Republic of Ireland offer even more liberal regulations as far as pension planning is concerned. Pensions invested into offshore schemes in these countries allow you to take your pension as a lump sum as long as you have been out of the country and investing in the plan for five years consecutively.

The key to investing in such plans is to ensure that you are investing in a Qualifying Registered Overseas Pension Scheme (QROPS).

Such schemes, which were introduced two years ago, allow you to take advantage of lower taxes and beneficial qualifying rates because once your cash is put into a QROPS plan, your money is no longer governed by HMRC laws.

The only legal requirement on this score is that your pension provider reports its transactions with you to the HMRC for the next five years. After this period, reporting stops and if you are still living abroad you can take your entire fund in cash.