What Happens to My Private Pension if I Move Abroad?
LEARNING OBJECTIVES
We’re passionate about providing free, high quality and up-to-date information to Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
How UK pensions are taxed abroad
How you can access your pension as an Expat
Whether to consider an Expat pension transfer
How to complete a pension transfer abroad
Best overseas pension options available
One of the most common queries amongst British Expats is “what happens to my pension if I move abroad?”
Typically, retirement accounts and UK Private Pensions are large assets that have accumulated over many years. As such, understanding your options when you no longer live in the UK is essential to the Expat retirement.
In this article, we will answer the most important questions relevant to retiring abroad, including the following:
How is my UK pension taxed abroad?
Can I access my pension if I leave the UK?
How do I complete a pension transfer abroad?
What are the differences between an International SIPP & a QROPS?
Where are overseas pensions based?
How to find an Expat Financial Adviser?
Can I Withdraw my Pension if I Leave the UK?
Determining your pension options as an Expat depends entirely on your existing provisions. In the UK, there are many different types of pensions. The 2 most common types of schemes are defined contribution and defined benefit pensions.
Defined Contribution Pensions
These are the most common type of scheme and are offered by major providers such as Aviva, Aegon, Standard Life, Transact and Fidelity.
These can be self-invested personal pensions (SIPPs) or company schemes with your employer. Defined contribution schemes are very simple to understand. The value of your pension is directly linked to what they are invested in. As such, they can go up and down in value depending on the underlying holdings.
Defined Benefit Pensions
These are less common, and typically far more valuable. Unlike the above, defined benefit pensions offer the policyholder a guaranteed income payment for the rest of their life once they reach the designated retirement age.
As such, it is rarely recommended to transfer out of these schemes, given the secure nature of the benefits.
When trying to understand your options, it's vital that you speak with your pension provider to have clarity on your position. Post Brexit, most UK pension providers will no longer allow flexible access to non-UK residents.
They typically offer the following:
Withdraw 100% of the pension at once:
Whilst this will give you all your pension funds in one go, it will likely trigger a large tax liability in your country of residence, depending on the size of the pension. It may also leave you with a shortfall further on in your retirement.
Take 25% PCLS payment, then buy an annuity:
This option may give you slightly more flexibility, however it is still not usually as desirable as full-flexible access draw-down (i.e. taking your pensions and when you please, in whatever amounts).
If your UK pensions state either of the above scenarios, you should consider transferring your UK pensions abroad to an alternative scheme, such as an International SIPP or a QROPS.
How do I Transfer My UK Pension Abroad?
The first step would be to engage with a regulated, independent Expat financial adviser. Given the complexity and importance of making the right decisions, most schemes will encourage or mandate that you work with a regulated professional to execute a transfer.
Be sure to complete thorough due-diligence on any firm that you look to work with, and make sure you explicitly understand the costs involved.
At The Wealth Genesis, we charge all our clients the same flat-fee, regardless of the complexity or size of the pension in question. This ensures zero conflicts of interests in our advice.
Once an adviser has assessed your position, there are 2 main options for UK Expats transferring their pensions
01 Transfer to an International SIPP
This is a UK-based, FCA regulated pension scheme that is specifically for British Expats. The SIPP has the exact same levels of protection and security as a traditional UK pension, but with the added benefits of multi-currency, wide investment choice, and full flexibility offshore. For more, see our in-depth review of the International SIPP for Expats.
02 Transfer to a QROPS
These accounts are normally based out of Malta, and previously provided significant tax efficient benefits (notably the absence of the Lifetime Allowance Charge), which was abolished in the 2023 UK budget.
Compared to a SIPP, they are more expensive on an ongoing basis. They are also not FCA regulated, nor covered by the Financial Services Compensation Scheme, which is very important to be aware of.
As such, we very rarely see the benefit of using these accounts for our clients.
How is my UK Pension Taxed Abroad?
In most countries, any income taken from a UK pension will be taxed at your marginal rate of income tax. This includes your UK state pension payments. In certain countries, there are opportunities to withdraw the entire amount and pay a flat-rate of tax (in France, for example).
The 25% Tax-Free payment (or pension commencement lump sum) is tax-free in the UK. It is not necessarily tax-free in other countries, so we would always advise clients to seek expert tax advice before making and draw-down decisions.
Expat Wealth Management | Best Practise
There are hundreds of international financial advisers and companies available to Expats, all with different charging structures and investment propositions.
We encourage all Expats to conduct thorough, patient due-diligence on any firm before going ahead. Be sure to ask the following questions:
Where is your company regulated?
Are you classed as a fiduciary (i.e. can you only act in my best interests)?
Can you refer me to customer reviews, or existing clients?
How much does your advice cost?
How will you advise me on an ongoing basis?
What measures are in place to protect my money?
Can I leave without cost if I am unhappy with the service or investments?
The Wealth Genesis is fully regulated and independent. To discover how our expert team can help you, contact us below.
Get Started with The Wealth Genesis
FAQs
-
Not necessarily.
If your existing UK pension provider can offer you flexibility in income and continue to allow you to manage the investments, then there is no pressing need to transfer. -
Post Brexit, many UK providers have become uncomfortable with providing ongoing servicing to Expats.
This is due to the lack of clarity around international regulations, as well as the costs associated with dealing with non-residents.
It is this issue that gave rise to the increasing number of International SIPP and QROPS providers. -
Most advisers charge between 5% and 1% based on the pension value for a transfer to an International SIPP or QROPS.
At The Wealth Genesis, we charge the same one off flat-fee, £3,000, to all clients regardless of the size of the pension. -
Yes!
Providing you have sufficient national insurance contributions, you can claim your state pension abroad.
You can check your state pension entitlement using the ‘government gateway’ online.
