UK pensions for expats guide

In this pensions guide for UK expats we answer the key questions.

If you live overseas or are planning to, it makes sense to get your financial future in order and that starts with expat pensions.

Let’s get into it.

Do I still get my pension if I move abroad?

In most cases, you do still get your pension if you move abroad.

What happens to my private pension if I move abroad?

You should be able to receive income from your private pension no matter where you live.

Additionally, your eligibility for annual increases shouldn’t change. You should receive them in exactly the same way you would do if you lived in the UK.

What happens to my workplace pension if I move abroad?

As with private pensions, you should be able to receive income from your workplace pension no matter your location.

Additionally, your eligibility for annual increases shouldn’t change. You should receive them in exactly the same way you would do if you lived in the UK.

What happens to my UK state pension if I move abroad?

You can contribute, claim and receive a UK state pension when you live abroad. The only thing that really changes is Pension Credit.

When you become a permanent resident overseas and officially lose your UK resident status Pension Credit stops. Essentially, this means any means tested benefit used to top up regular income will no longer be available to you.

To ensure you keep your state pension make sure you notify the International Pension Centre as soon as you move. You can find their contact details here.

Do I pay tax on my UK pension if I live abroad?

You may need to pay income tax on your pension income.

This will depend on where you live and how much you receive as non residents are still eligible for the personal allowance and the UK has double-taxation agreements with many countries which prevents you having to pay tax twice.

If you live in a country that has a UK double taxation agreement in place and have to pay tax in that country, you won’t have to pay again in the UK.

You can visit the UK governments website to see if the place you live has a tax agreement in place with the UK here.

Moving overseas before you start receiving your pension

If you plan on moving overseas, it makes sense to talk to your pension provider before you make your move.

Be aware of currency fluctuations. Currencies in different countries can rise and fall in value when compared to the pound.

Depending on the country you plan on moving to, it might make sense to have a contingency plan for if the pound weakens against your local currency.

Having some emergency cash in reserve or spending less that you receive are both simple options that could help you in times of need.

Can UK pension providers pay into a foreign bank account?

Some UK pension providers can pay into a foreign bank account, but others insist on paying into a UK bank account. We’ve covered banks for expats in a bit more detail here.

Can I contribute to a UK pension as a non resident?

Some UK pension providers don’t allow you to contribute to your pension, but others do.

In any case it is unlikely that you’ll be eligible for tax relief in the same way you would be as a UK resident.

Do expats qualify for tax relief?

Most expats won’t be eligible for tax relief on contributions. This is because you must have been a relevant UK individual for the tax year you want your relief applied to.

You will only be classed as a UK relevant individual if:

• you have relevant UK earnings chargeable to UK income tax for that tax year
• you’re resident in the UK, or
• you were resident in the UK in one of the previous five tax years and, at the time you were resident, you became a member of a UK registered pension scheme, or
• you’re a Crown Servant – or a spouse/civil partner of a Crown Servant – and have earnings subject to UK tax.

Steps to take if you have plans to return to the UK

The following steps are advisable for anybody returning to the UK from overseas:

• Notify the International Pension Centre
• Contact HMRC and ask them if you need to pay any tax

How will Brexit affect my pension?

It is possible that Brexit will affect people who move to a European Economic Area country on or after the 1st of January 2021. You can see the latest from the UK government here.

What is QROPS (Qualifying Recognized Overseas Pension Scheme)?

QROPS is a way to transfer into an expat pension scheme from a UK one.

QROPS stands for Qualifying Recognized Overseas Pension Scheme. It is something similar to a SIPP but based outside the UK.

Though a QROPS is recognized by the HMRC that doens’t mean it is fully protected. All an overseas pension scheme needs to do to become a QROPS is meet HMRC criteria.

And rather than involving any HMRC oversight this is a self certification process and as such I’m sure it goes without saying that you must do your due diligence and speak to a good financial advisor if you are considering a QROPS.

What can I do if I don’t have a UK pension?

If you don’t have a UK pension you might want to consider taking a DIY approach. It really is an authentic UK pension scheme for expats that are willing to handle matters themselves.

At the end of the day, the majority of expat pension UK providers simply invest your money in stocks and bonds in a tax efficient way and charge you for the privilege.

And really why pay? Because all you really need to do is open a brokerage account and choose a couple of index tracking exchange traded funds (ETFs). (If you don’t already have a brokerage account we’ve compared a few here that are open to expats).

These days you really can put together a low cost, globally diversified, tax efficient, multi asset expat pension with just a couple of ETFs.

And it’s worth bearing in mind, that HMRC is only interested in tax on shares if you come back to the UK within 5 years. Not only this but British expats are also eligible for the personal allowance and dividend allowance so depending on your country of residence you may be able to invest pretty much tax free anyway.

Another massive benefit with DIY investing is you have total control over your money. That means you can decide what you invest in, and most importantly, you can access your money at anytime rather than having to wait until 55 as with most pensions.

Can property investment fund expat retirement?

Some expats do use property as a pension alternative. Using buy to let (BTL) to fund your lifestyle in retirement is actually a lot more common than it used to be.

The downsides of using property as a pension are that you’ll have work to do and you really need to use mortgages to make it work for you.

Even fully managed properties have emails to reply to and decisions to make.

And you need the power of leverage/gearing that you get with borrowing money and the rental income to pay off your mortgage interest to get the big returns.

However, if you let your property out and use a mortgage you’ll usually get much higher investment returns than you’d get with shares. We’ve compared them here if you are interested.

The key thing to watch is tax. There are two ways to make money through property. You’ve got rental income and then you have capital gains.

The problem with rental income is that it does count as income and HMRC likes to tax that. However, if you are a British passport holder, you should qualify for the personal allowance. This means you can earn around £12.5K tax free or £25K for a couple. Only above that number do you pay income tax.

Not only that but you can also grow your wealth through capital gains without realizing those gains.

Say you pay £25K deposit and borrow £75K from the bank to buy a £100K property that doubles in value. Providing your financial standing hasn’t changed you should be able to remortgage at a similar loan to value ie 75% LTV.

That’s a £150K mortgage you should be able to get in other words you’ve just made a decent chunk of money with no capital gains to pay. Only when you sell the property do you need to worry about that.

And there are dedicated guides for both BTL here and mortgages here.

Where can expats get financial help?

There are some good sources of UK expat pension advice out there if you look hard enough.

If you want general free advice we always recommend starting with the Money Advice Service. In fact, we often refer back to them on this site.

In short, it’s a free UK government backed website full of information on everything finance related. The information isn’t specifically aimed at expatriates but there is a lot on there that is relevant.

And if you can’t find what you are looking for there, Money Helper is a reasonable alternative which again is backed by the UK government.

Professional advice

The key to finding good pension advice is finding a professional you trust.

I’m sure it goes without saying that bad ones could cost you a lot if not all your money so do put a little due diligence into your search.

The good news is there are a couple of great free tools available from trusted sources for finding financial advisors that can help you with pensions.

First up is Money Helper (as mentioned above). It has a great Financial Advisor Search Tool too. You can find it here.

And then the Personal Finance Society has another one here.

For your information, the Personal Finance Society is the leading professional body for the financial planning sector. You key in your location and they’ll provide a list of qualified financial professionals that should be able to provide UK expat pension advice.

UK pensions for expats – The bottom line

Pensions don’t need to be complicated even for expats.

If you’ve already got one you should be able to continue to contribute and receive income no matter where you live.

If you don’t already have one in place you might want to take a DIY approach. You can use a couple of index tracking ETFs to make a great pension for expats.