Pensions and moving abroad

Pension considerations when moving abroad

Moving

Managing a UK pension while living abroad can be somewhat challenging. The extent of those challenges will mainly depend on the type of pension you are receiving. Here is an overview of some of the decisions you will need to make and the various taxes you will need to consider.

What are my pension options if I live abroad?

Your pension will grow as long as your investments are doing well, even if you have stopped making contributions. Initially, you moving abroad won’t have any impact on your pension.

Defined contribution pensions

Those who have a defined contribution pension can live anywhere globally and let the pension stay with the UK pension provider. There isn’t anything you need to be concerned about, especially if you do not make any contributions. However, it might be somewhat tricky if you want to start making contributions or drawing from your pension. That’s something that we will explain in detail in the lines ahead.

There is often no need to transfer a pension to a local provider in a new country if you have an international Defined Contribution pension, such as an International SIPP. However, if you have a Qualifying Recognized Overseas Pension Scheme – QROPS the rules are slightly different. We recommend you speak to a regulated financial advisers to identify your options.

UK Pension Retiring Overseas

Defined benefit pensions

Defined benefit pensions can also be left with your UK pension provider when staying abroad. Similarly, as with defined contribution pensions, transferring the pension in another country has its challenges. But if you are determined to make that happen, you will get a cash value for your pension once the transfer is completed. However, you won’t get any guaranteed income, and you will lose all safeguarded benefits that were previously part of your pension scheme.

QROPS

Can I claim my UK pension if I live abroad?

If you live abroad and yet you still want to make contributions toward your UK pension scheme, you can do so if you use the services of a UK bank. One needs to keep in mind that most pension providers in the UK don’t accept contributions from international bank accounts. Therefore, you will need to transfer your contributions first in your UK bank account and from there into your pension pot. Keep in mind that your transfer will be affected by both international transfer fees, as well as the exchange rate. In any case, if you have such plans, you should discuss them with your pension provider and find the most optimal solutions to proceed with regular pension contributions.

Managing your UK pension from abroad

Just because you live abroad, it shouldn’t impact your ability to manage your UK pension. Even though your taxes, contributions, and accessibility to your pension may change, managing the pension should remain the same. You need to make sure that you are paying the right amount of tax. To do so, you will need to contact the HMRC

The biggest issue is drawing money from your UK account. Most UK pension providers are quite reluctant when it comes to drawing money into an overseas bank account. If you manage to figure out some deal with your pension provider and receive money directly on your overseas account, you will need to cover the transfer fees from your pocket.

How do you manage your pension if you live in Europe?

SIPP

You usually won’t pay tax on your pension if this doesn’t apply.You’ll also be able to get a refund on the taxes if you move back to the UK, Gibraltar or the EEA within five years of the transfer. You’ll need to contact both the UK and your international provider using an APSS241 form, and the tax refund will be allocated to the pension it was taken from. If you transfer your pension to a QROPS based in Europe, then you’ll only pay tax if you move or live outside the UK, Gibraltar or the European Economic Area (EEA) within five years of transferring your pension.

How do you manage your pension if you live outside Europe?

If you’ve moved to a country outside the European Economic Area (EEA), you usually won’t pay any tax if you’ve transferred the pension to a QROPS based in the country you live in.You’ll have to pay a 25% tax charge if you’re not resident in the same country as your QROPS.

Do you qualify for tax relief if you live abroad?

You can get tax relief only for the year in which you lived and paid all of your taxes and if you still contribute to your UK-based pension pot from abroad. Those that spent more than a year abroad can get any tax relief. To remove all doubts, make sure you inform the HMRC when you move overseas. That way, you can be sure that you will pay the right amount. 

Expat pension tax

Your residency status determines the tax you will need to pay. In addition to facing UK tax charges, you might also be looking at charges coming from your country of residence as well. On a positive note, your annual pension allowance will be removed because you live overseas. Therefore, it will be possible to contribute more than ₤40,000 to your pension pot. Plus, the UK has a double-taxation agreement with certain countries, which means you won’t be taxed two times.

The final amount of tax you will need to pay depends on whether your new country of residence has a double-taxation agreement with the UK, the structure of the taxes in the country of residence, and how much tax relief you can claim in that country. In case you reside in a country that doesn’t have a double-taxation agreement with the UK, you will either get a refund after taxation or apply for tax relief before you are being taxed. If you opt to apply for tax relief before being taxed, know that you can choose between partial and full tax relief. In case the tax rates are different in the two countries, you will need to pay the higher one. 

Another important consideration is the tax year. In the UK, it runs from April 6th to April 5th, whereas in the country of residence, the tax year can apply to different dates. Because of these factors, it is essential to be informed well and even have a talk with a financial adviser on the matter. You can also visit www.gov.uk for more detailed information about expats’ tax relief when living overseas.

 

What happens to a state pension after you move overseas?

You will be able to receive your pension even though you’ve moved abroad. However, your state pension will grow each year only if you meet the following criteria:

At least six months living in the UK each year

Switzerland

A country in the EEA

A country that has signed a social security agreement with the United Kingdom

Moving abroad will also deprive you of any pension credits you receive while in the United Kingdom. If you decide to return to the United Kingdom, you will start to receive all the state pension benefits again.

When working and living abroad, you can still make your National Insurance Contributions by making payments into the social security system of: 

  • A country that has a social security agreement with the UK
  • Gibraltar
  • Switzerland

But even if your new country of residence is not on the list above, you can still make Class 3 National Insurance Contributions. To that end, you will need to use a NI38 form that needs to be submitted to the HMRC.

How to claim a state pension when living abroad?

If you live abroad, you can claim your state pension in the same manner as if you were living in the UK. You can have your state pension paid into a UK bank account or an international bank account. If you receive your pension in an international bank, it will be paid out in the local currency. Therefore, the amount you will receive will depend on the exchange rates at the given moment of the transfer.

Moving abroad and need pension advice?

UK Pension Help can connect you to a qualified, regulated financial adviser who can answer any questions you might have around moving abroad and the impact it has on your pension(s).

Book your free, no obligation consultation today through our website so they can further assist you.