What happens to your pension if you move overseas will depend on whether you have a defined contribution pension or a defined benefit (final salary) pension.
If you have a defined contribution pension, you have two options for what you can do with your pension if you move abroad. You could:
If you leave your pension in the UK, your options for how you take the pension will be the same as if you’re living in the UK. However, it’s unlikely that your pension provider will pay your pension money into an overseas bank account – or least not without charging you a fee to do so. But your provider could pay your pension into a UK bank account for you to then withdraw from or transfer to an account in another country.
If you want to transfer your pension to another country, you should transfer it to a qualifying recognised overseas pension scheme (QROPS). If it’s not a QROPS, you’re likely to have to pay a tax charge, and your UK pension provider could even refuse to transfer it.
Certain conditions need to be met to transfer a pension abroad, and you may need to pay costs. It’s also possible that transferring it will change the amount you receive when you retire, but you’ll need to check this with your provider.
Moving your pension to another country can be quite complex, so it’s best to speak to a regulated financial adviser before you do anything.
If you have a final salary or defined benefit pension, it’s best to speak to a regulated financial adviser about your pension options if you’re planning to move to another country. Transferring one of these pensions to another country may result in you losing out on the guaranteed income that it offers. So it may be better to leave your pension in the UK and take money out in the usual ways, but this will depend on your personal circumstances.
It may be possible to pay into a UK pension if you live abroad, although check with your pension provider as to the rules for the scheme you’re enrolled in. Even if you can pay into a UK pension while living abroad, you might not qualify for tax relief on your contributions. Find out more from the Pension Advisory Service.
Provided you’ve paid enough national insurance contributions to qualify for it, you can still claim your state pension if you live abroad. You can get your state pension paid into a bank in the country you’re reside in, or into a UK bank or building society. If you choose to have it paid into an overseas account you’ll get paid in the local currency – so the amount you get may change depending on the exchange rate.
But that’s not all. Depending on where you live overseas, your state pension may not increase as it would if you lived in the UK. Your residency could also affect how much tax you’ll need to pay on your state pension income.
If you’re thinking about claiming your state pension abroad, you’ll need to contact the International Pension Centre. Find out more about claiming your state pension abroad.
You may have to pay tax on your pension if you’re living abroad and receiving pension benefits. The amount of tax you pay will depend on your residency status.
If you’re classed as a UK resident, for tax purposes, you may have to pay UK tax on your state pension, and you might have to pay UK tax on your other pension income.
If you’re classed as a non-UK resident, for tax purposes, you won’t usually have to pay UK tax on your state pension, but you may still have to pay UK tax on your other pension income.
If you live in a country that doesn’t have a double taxation agreement with the UK, you might have to pay tax in both countries.
As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. A pension may not be right for everyone and tax rules may change in the future. If you are unsure if a pension is right for you, please seek financial advice. Please note that during any transfer, your investments will be out of the market.
Our team of specialists can help answer any questions you may have.