What happens to my pension if I move abroad?

Moving abroad and managing a UK pension can be tricky since your options will vary depending on the type of pension you have. We’ll look at some of the decisions you need to make and the different taxes you’ll face.

What are my pension options if I live abroad?

Initially, your pension will be unaffected if you leave it in the UK.

If you stop paying into your UK pension, it will remain active and will continue to grow depending on the performance of its investments.

Defined contribution pensions

If you’ve got a defined contribution pension, you can leave it with your UK pension provider. If you’re no longer contributing to it, you can live anywhere in the world and won’t need to do anything. However, contributing or drawing down from your pension can be tricky, which we’ll go through in more detail later on.

Should you wish to transfer your pension to a provider based in the country you’ve moved to, they’ll need to be a ‘recognised overseas pension scheme (ROPS)’. It’s important to check this, otherwise your UK provider may refuse the transfer, or you could face heavy tax penalties upon transfer.

Defined benefit pensions

Similarly to a defined contribution pension, you can leave your defined benefit pension (also known as ‘final-salary’) with your UK pension provider when moving abroad.

However, transferring it abroad can be complicated. You’ll receive a cash value for your pension upon transfer, which means you’ll lose the guaranteed income and any safe-guarded benefits attached to the policy.

Can I claim my UK pension if I live abroad?

UK pension providers won’t usually let you draw down into an overseas bank account. If providers do pay directly into an overseas account, there are often fees associated with doing so.

If you have a bank account in the UK, you’ll be able to draw down your pension into that. However, you’ll then likely face transfer fees and exchange rates when moving it to your international account.

Managing your pension from abroad

Living overseas shouldn’t impact the way you manage your UK pension. Although contributions, taxes and accessibility to your pension may differ, the actual management of the pension shouldn’t change at all. You’ll need to let HMRC know, to ensure you’re paying the correct amount of tax.

If you want to contribute to your UK pension, you may be able to continue to do so if these payments are made from a UK bank account. Bear in mind that any money you transfer will be affected by the exchange rate and could be subject to international money transfer fees (depending on the method used). Providers don’t usually accept contributions from international bank accounts, but it’s worth speaking to your provider about this.

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

If you transfer your pension to a ROPS based in Europe, then you’ll only pay tax if you live or move outside the UK, Gibraltar or the European Economic Area (EEA) within five years of transferring your pension.

If this doesn’t apply, then you usually won’t pay tax on your pension. 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.

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 ROPS based in the country you live in. If you’re not resident in the same country as your ROPS, then you’ll have to pay a 25% tax charge.

Do you qualify for tax relief if you live abroad?

If you’re still paying into a UK-based pension from overseas, you’ll only qualify for tax relief if you lived and paid taxes in the UK during that tax year, or are classed as a ‘Relevant UK Individual’. You may only receive tax-relief on contributions up to £3,600 gross unless you have UK relevant earnings within the tax year.

On the other hand, you’ll no longer be limited by the annual pension allowance if you live abroad. So you can pay more than your annual earnings or £60,000 into your pension if you wish.

It’s best to speak to a financial adviser to discuss individual UK expat pension entitlements and you can visit gov.uk for more information around expat tax relief when living abroad.

Expat pension tax

The tax you pay on your pension will depend on your residency status. On top of possibly facing UK tax charges on your pension, you may also face charges from your country of residence too.

Some countries have a double-taxation agreement with the UK, meaning you won’t be taxed twice (by the UK and your new country of residence). The double-taxation agreement depends on the country you pay tax in, the country you apply for tax relief in and how much tax relief you’re entitled to.

If your country of residence does have a taxation agreement with the UK, you’ll have two options; you can either apply for full or partial tax relief before you’re charged, or you’ll be able to get a refund after you’ve been taxed. If the tax rates between the countries are different, you’ll be taxed at the higher of the two. It’s important to remember that the tax years may also be different to the UK (which runs from 6 April to 5 April the following year), and you’ll need to fill in a claim form for your tax relief.

To avoid doubt, it’s important to inform HMRC when you move overseas so you pay the right amount.

What happens to my State Pension if I move abroad?

If you move abroad, you’ll still be able to receive your UK State Pension. However you’ll only get State Pension increases each year if you live in:

  • Switzerland
  • A country in the EU or EEA
  • A country that has a social security agreement with the UK that allows for cost of living increases to the State Pension

If you don’t meet any of the above criteria, you’ll only start receiving the State Pension increases again if you moved back to the UK. Any pension credits you receive whilst in the UK will also stop if you move abroad.

You’ll still be able to make your National Insurance Contributions whilst working abroad if you’ve been paying into the social security system of:

  • A country in the EU or EEA
  • Switzerland
  • A country that has an a social security agreement with the UK

You can continue making voluntary class 3 National Insurance Contributions whilst you’re living abroad, regardless of your country of residence. You’ll need to submit the NI38 form to HMRC to do this.

Can you claim the State Pension living abroad?

You can claim your State Pension abroad in the same way you would in the UK. The State Pension can be paid into a UK bank account, or into an international bank account too. However, if it’s paid into your international bank account, it’ll be paid in the local currency, so the amount you receive will depend on the exchange rates at the time.

To receive your State Pension, you’ll need to make a claim. You can do this by contacting the International Pension Centre. The Government has more information about your State Pension entitlement when living abroad.

PensionBee can help you combine your pensions for you

Sign up to PensionBee today to get your pensions in order. You can sign up in just a few minutes, and you’ll be assigned your very own BeeKeeper who’ll be on hand to help you with any questions throughout your pension journey.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 06-04-2024

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