UK Pension Review

What happens to your pension when you move abroad?

If you’ve relocated overseas or are planning to retire abroad, you might be wondering what happens to your UK pension. Whether you’ve been building retirement savings in a UK workplace scheme or through a personal pension, moving abroad doesn’t mean losing access to your pension, but it does introduce a new layer of complexity.

For British expats or foreign nationals with pension rights in the UK, understanding how to manage your pension from abroad is key. The rules around contributions, access, taxation, and transfers vary depending on where you move, what type of pension you hold, and your long-term plans. With the right structure and planning, you can still make the most of your UK pension, even when you are based overseas.

Can you still contribute to a UK pension while living abroad?

Yes, but there are limits.  If you're a UK national living overseas, you may still be eligible to contribute to a UK pension scheme, such as a personal pension or Self-Invested Personal Pension (SIPP). However, your ability to claim tax relief on your contributions depends on your UK earnings and tax residency status.

• If you’re no longer a UK taxpayer, your annual contribution limit for tax relief typically drops to £3,600 gross (£2,880 net) for five years.
• If you still earn income subject to UK tax, you may be able to contribute more and claim full tax relief up to 100% of your relevant UK earnings (subject to the annual allowance).

It’s important to note that contributions beyond these thresholds may not be tax efficient or may result in unintended tax consequences.

What are your options for managing your UK pension from abroad?

Your options depend on the type of pension you have and your future plans. Typically, the pensions held by expats fall into one of the following categories:

• Defined Contribution (DC) pensions, such as personal pensions or SIPPs.
• Defined Benefit (DB) pensions, such as final salary schemes from former employers.

If you're living overseas, you may consider one or more of the following options:

1. Leave your pension where it is
   For many, leaving a pension with their existing UK provider is a simple option. You’ll still have access to your pension when you reach retirement age, though currency exchange and tax implications will need to be managed carefully.
2. Transfer your pension to a SIPP
   This option can provide greater control and flexibility over investments, withdrawals, and currency. It can also be easier to manage multiple pension pots in one place. However, it's important to assess charges, investment options, and any risks before making a transfer.
3. Explore overseas transfer options
   For some expats, a Qualifying Recognised Overseas Pension Scheme (QROPS) may be worth considering. These allow you to transfer UK pensions to an overseas scheme under certain conditions. However, tax rules and transfer charges may apply, especially with the Overseas Transfer Charge (OTC), and local regulations must be carefully reviewed.

Important: Not all pensions are eligible for transfer, and DB schemes in particular carry additional considerations. You should always seek professional advice before making any changes to your existing pensions.

What about tax?

Tax is one of the biggest considerations when managing your pension as an expat.

• If you remain a UK tax resident, pension income may still be taxed in the UK.
• If you become tax resident abroad, your pension income may be taxed locally, depending on the country’s laws and any double taxation agreements (DTAs) in place with the UK.

Some countries tax UK pension income; others don’t. Understanding your tax position is crucial, as it can significantly impact the value of your retirement income.