What happens to my pension if I move abroad?

Under UK pension legislation an individual can access their defined contribution pension benefits from the age of 55, 25% of the fund usually being tax free and the remainder is taxed as earned income. State Pension, when it commences, is also subject to income tax, but for those who decide to leave the UK when they retire the rules for personal and State pensions do differ as we cover here.

Personal pension benefits

You can receive your personal pension benefits if you live outside of the UK and the rules outlined above will still apply, but there are additional considerations:

  • Your pension provider may not make payment to an overseas bank account, meaning that you may still need to retain a UK based account
  • Tax in your country of residence will usually apply, so if tax has been paid in the UK you won’t be taxed again if a double taxation agreement exists with the UK, but it is advisable to seek independent tax advice to be certain of the position
  • Currency risk will apply, as payments made in Sterling will need to be converted to local currency

A further option to consider is a transfer to a Qualifying Recognised Overseas Pension Scheme –QROPS for short. Over recent years HMRC have tightened the rules surrounding QROPS and professional advice is essential before considering if this is a viable option.

State Pension benefits

Again, you can still receive your State Pension if you leave the UK, but you will only benefit from any increases to it if you meet the following conditions:

  • You live in the UK for 6 months or more each year
  • You live in the European Economic Area (EEA). EEA countries are those in the EU plus Iceland, Liechtenstein and Norway as well as Switzerland
  • You live in a country that has an agreement with the UK to allow increases

As with personal pension benefits, you should seek advice regarding the tax treatment of UK State Pension benefits in your country of residence.

If you are planning to move overseas, we strongly recommend that you seek professional advice before leave the UK so that you can ensure your retirement benefits are structured in a way that meets your future needs and which fits with the rules of the country in which you plan to live.

Many financial planning firms in the UK (including ourselves) are not authorised to provide financial advice to individuals once they leave the UK so this needs to be borne in mind.

Armstrong Watson has a team of independent financial advisers and tax consultants who are well placed to help you plan, whatever your retirement goals may be. Contact our team on 0808 144 5575.

For further advice on your retirement savings, please call Marcus Dodds on 01228 690184 or email him using the link below.

Contact Marcus

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