Many of us dream of living and working abroad – whether that’s to develop our professional skills, improve our career prospects or simply to immerse ourselves in other cultures. Indeed, there are many benefits to be gained from doing so, especially as people are now embracing the age of longevity and adopting a more flexible life structure.
However, living and working overseas comes with key financial considerations, and could impact your pension plans in the UK. If you’re already living abroad or are looking to do so soon, this article aims to tell you what you need to consider.
Different rules apply when you contribute to a UK pension scheme while living abroad
Simply put, an expat is an individual living and working somewhere else other than their country of citizenship. There are some rules around contributing to a UK pension scheme while living overseas, depending on the type of expat you are. In general, you can work abroad and continue saving into a UK pension plan, but there might be limits on the tax relief you can claim on your contributions.
Before moving abroad, you should always inform your pension provider so that appropriate action can be taken depending on your circumstances. Be sure to check that your provider can accept contributions from overseas.
Moving abroad but working for a UK company
Most often, UK companies only send employees abroad for the short term. If your earnings are subject to UK income tax, you’ll still be able to save into your pension plan. The limit on your personal contributions for tax relief purposes would still be the greater of £3,600 gross per annum and 100% of your relevant UK earnings in that tax year. In addition, your UK employer can continue contributing to your pension.
If you’re going to be abroad for the long term, you might be employed under a foreign subsidiary or third-party employer. This might have different tax implications – see the next section on ‘Moving abroad to join a foreign company’ for more.
Moving abroad to join a foreign company
If you’re being paid and taxed overseas, you can still save into your UK pension plan, but there are some tax limitations. You’ll only be able to receive tax relief on personal contributions of up to £3,600 gross per annum for five full tax years following the tax year in which you move abroad. You must also have been a resident in the UK when you became a member of your pension scheme.
Moving abroad to retire
Private pensions can usually be paid to you wherever you are in the world. However, some providers might only be able to pay into a UK bank account, while others might charge you a fee for paying into an overseas account.
You can also receive a UK State Pension while living overseas – see the section below on ‘Can you receive a UK State Pension if you live abroad?’ for more.
What are your long-term plans?
Live overseas for good
If you intend to settle overseas permanently, you can consider a Qualifying Recognised Overseas Pension Scheme (QROPS). This refers to an overseas pension scheme that meets certain requirements set by HM Revenue & Customs (HMRC) to receive transfers from pension schemes registered in the UK.
However, each QROPS has its own rules and requirements as outlined on MoneyHelper’s website. Make sure to speak to your financial adviser before transferring your pension overseas. You can find a financial adviser through MoneyHelper – there could be a charge for this.
Return to the UK
If you intend to move back to the UK in the future, your best option might be to keep your UK pensions in place while also contributing to a separate pension pot in the country you’ll be earning in. The option that works best for you will depend on your individual circumstances.
Upon your return, it’s possible to transfer your overseas pension to the UK, depending on the rules of the origin country and the type of pension in question. Also, some UK schemes might only accept transfers from a Recognised Overseas Pension Scheme (ROPS) that meet HMRC’s requirements.
Generally, transfers into UK pension plans aren’t deemed as pension contributions and hence do not qualify for tax relief.
Can you receive a UK State Pension if you live abroad?
The short answer is yes, you can, provided you’ve paid enough UK National Insurance contributions to qualify. You must be within four months of your State Pension age to claim. Do note, however, that you’ll not receive any Pension Credit if you move overseas permanently.
Do you need an International Pension Plan?
Some companies offer an International Pension Plan (IPP), which is a retirement scheme specially designed for employees who frequently move between countries. If you work for a global corporation that requires you to relocate every few years, consider speaking to your employer about enrolling into an IPP.
Setting up a solid financial foundation for your travels
Living and working abroad can be a highly enriching and fulfilling experience, but it also requires careful consideration of your financial future, particularly when it comes to pension planning. Understanding how your expat status, employment situation, and long-term goals affect your UK pension is crucial.
Whether you're working for a UK company, joining a foreign firm, or retiring overseas, being informed about the options available can help you make the best decisions for your retirement. For personalised guidance, it’s always wise to consult a financial adviser who specialises in expat pensions. You can find a financial adviser at MoneyHelper. There may be a charge for this.