Nothing kick-starts your retirement like a big move abroad. To make that vision of retiring to a distant paradise a reality, it of course needs to be funded – and probably your greatest friend here is going to be your pension. So, do the rules and regulations around a UK pension still apply when you live abroad? Can you access it or still contribute to it?
This article is about answering the biggest questions that are likely to be bugging you and the kind of preparations you can make to your pension if you need to before you go.
Can I access my UK pension from abroad?
Yes – if you are setting up home abroad and you have a defined contribution pension or a money purchase scheme, your savings will be available to you for when you claim. You can either leave your pension pot in the UK and access it from abroad or you can move the pot to the country you are living in.
Do I need a separate oversees bank account?
Generally speaking, pension schemes do not pay your funds into an overseas account. So, if you need to transfer your money from a UK bank account you should also factor in the impact of any transfer fees and exchange rate variations on the money you receive.
Can I move my pension tax-free?
Yes. If you have contributed to an occupational (defined contribution or final salary) or private UK pension you can move the pension pot offshore tax-free. The scheme you are transferring to must be a Qualifying Recognised Overseas Pension Scheme recognised by HMRC. QROPS benefits from zero taxation at source, reduced tax liability and more options when it comes to passing on your wealth2. Be aware this only applies to EEA countries. Transferring your pension to a QROPS outside of the EEA or Gibraltar could result in paying tax. Bear in mind tax treatment depends on your own individual circumstances and may be subject to change.
Free pension information guideCan I still contribute into my employer’s pension scheme if I am working in an overseas base?
Yes, you can. The good news is you are now allowed to be a member of a UK pension scheme wherever you live in the world. Therefore, if you will be working at your employer’s base abroad, you can still contribute to the UK company pension they provide. The amount of tax relief you would normally receive if you were living in the UK may be restricted as this is supposed to be an advantage for UK residents only.
Will I qualify for tax relief?
To be eligible for tax relief as the law stands in 2022 you would need to satisfy one or more of the points below:
- You received UK earnings which were chargeable to UK income tax in that year
- Sometime during that year, you were tax resident in the UK
- You were tax resident at some point during the previous five years and when you joined the pension scheme
Will Pension freedoms still be available to me?
Fundamentally, yes they will be if you leave your pension pot in the UK, but you may be more restricted for choice. This is because not all pension schemes allow you to access all of the options available. So in order to access benefits such as pension release or flexi-access drawdown, you would need to transfer your pension pot to an appropriate UK pension scheme. It is likely if you are living abroad you would not have a choice of packages or schemes to choose from. So if you are looking to do this, it might be worth looking into your options before you go.
What should I check before moving abroad?
It is no doubt that getting your financial affairs in order will be top of your list. And a main player here of course is your pension. It’s always a good idea to keep a keen on eye on how well your pension is performing – especially if you are thinking of relocating abroad sometime in the future. Don’t leave your annual updates from your pension provider on the back burner – check out the growth of your policy and whether the features are still in line with your needs as you consider your new lifestyle.
Whilst some advisors are able to advise across the continent, it is almost certainly more straight-forward to track down a financial adviser who understands the rules and regulations of UK pensions while still resident in this country. It therefore follows that reviewing your pension before relocating has to be a good idea.
Can I receive the UK state pension?
Yes, you can – just like a personal, private or company pension. The issue is with pension increases which are related to inflation in the UK.
You would only receive an increase if you were living in:
- The UK for 6 months a year or more
- The European Economic Area (EEA) Switzerland
- A country that has a social security agreement with the UK that allows for pension increases
To source further information about Accessing your pension abroad: https://www.pensionsadvisoryservice.org.uk/
*Tax treatment depends on your individual circumstances and may be subject to change. The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date (20th November 2018), but could be out-of-date by the time you read the article.
