Keren Bobker: on Dubai tenancy and changes to UK pensions
We are an Italian couple and have recently moved to Dubai where we have a small problem. We paid one year’s rent for a studio using the pink paper which confirms that the working visa is under process. My wife now wants to leave this company as she is not happy there. The agent keeps asking about the real working visa, but this is now not going to happen as she has resigned. What happens under these circumstances? RA, Dubai
Only someone with a residency visa can sign a rental contract, although it is standard practice to do so when a visa is being processed. If a property is rented and the correct visa does not materialise the landlord could argue that the tenant has not fulfilled their side of the bargain and request that the lease be ended, effectively demanding eviction. To remain in the UAE and in this property one of you should have a valid residency visa.
I have heard there are changes to UK pensions which will allow people to take out all the money in a plan whenever they want it. I spoke to someone who told me I had to transfer my pensions to a QROPS (Qualifying Recognised Overseas Pension Scheme) and then I could take all the money without paying tax. Is this part of the new rules? FG, Dubai
A QROPS is an overseas pension scheme but it does not permit the pension holder to withdraw the full value of the fund. Monies can be transferred only to arrangements in approved jurisdictions which comply with the rules. At 30 per cent, the Pension Commencement Lump Sum for a QROPS is higher than a UK arrangement that allows you to withdraw only 25 per cent, and the income is usually payable without UK income tax being deducted at source – although this does not mean there is not a personal liability as that depends on the individual’s residency and tax status. If someone takes out more than the approved amount of cash, this action can be fined a total of 55 per cent of the value of the pension plan.
In the most recent UK budget, changes were announced to the way pension benefits can be taken. From April 2015, pension investors who have reached the age of 55 should be able to take the whole of their pension as cash. The first 25 per cent is likely to be tax-free (dependent on residency), while tax will be payable on the remainder at the individual’s highest rate. The biggest change is that the government is also abolishing the 55 per cent tax charged on cash taken out of a UK pension fund in excess of the 25 per cent allowance. For the majority of UK pensioners that means they will be taxed at only 20 per cent, although many with larger pension pots, and income from other sources, will be taxed at up to 45 per cent.
Keren Bobker is an independent financial adviser with Holborn Assets in Dubai. Contact her at firstname.lastname@example.org Follow her on Twitter at @FinancialUAE
The advice provided in our columns does not constitute legal advice and is provided for information only. Readers are encouraged to seek appropriate independent legal advice
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Published: May 3, 2014 04:00 AM