What happens to your pension when you leave the UKIf you are planning to move abroad, whether it’s for a few years or longer term you may not have considered what happens to your pension when you leave the UK.

This is something you really should consider and be clear on. If you have been paying into a pension for 10 years plus, it is likely to be one of your biggest assets and a significant factor in what sort of lifestyle you will have in retirement.

We have recently spoken about how you are taxed when moving abroad and you can read that article here. This article deals specifically with pensions.

What can you do with your pension when you leave the UK

Firstly let’s deal with your own personal/employer pensions. If you are not yet receiving any income from the pension (perhaps not retired yet) then you have 2 options:

  • Leave your pensions where they are in the UK.
  • Transfer your pensions to a Qualifying Recognised Overseas Pension Scheme (QROPS).

A QROPS is a pension that is based in a different country to the UK that satisfies HM Revenue and Customs (HMRC) rules, meaning it operates in a similar way to UK pension schemes. If you plan to transfer your pensions abroad be very careful. Check that the new pension scheme is a QROPS. If you transfer your pension to a scheme that is not a QROPS you will suffer a 55% tax charge on your pension meaning more than half will be lost!  

If you are already in receipt of income from a previous personal/employer pension then there isn’t really anything you need to do. You can continue to receive the income in the new country you are moving to and this will either be taxed in the UK still or the new country depending on whether they have a ‘double taxation agreement with the UK.

When it comes to your government State Pension, if you move abroad and no longer pay National Insurance Contributions then your future State Pension may be reduced, if you have not yet paid the 35 years that ensure you receive a full State Pension. You can continue to pay UK National Insurance Contributions even if you live abroad to protect your State Pension.

If you are already receiving your State Pension or expect to whilst you live abroad then it will only increase each year if you live in the European Economic Area (EEA) or a country that has a social security agreement with the UK. You can check these countries here.

5 points to consider for your pension when you leave the UK

  1. If you decide to leave your pension in the UK you can still contribute to it but you may not get tax relief on contributions like you would in the UK.
  2. If you do decide to leave your pensions in the UK keep an eye on pension rule changes. The government tinker with pensions every year and you don’t want to find you are restricted at the point you would like to start taking an income from your pension.
  3. If transferring your pension abroad make sure the new pension is a QROPS. You should check the scheme with HMRC.
  4. If you plan to return to the UK in the future consider paying UK National Insurance Contributions whilst abroad to protect your State Pension.
  5. Consider the new country you are moving to. If you move to a country that does not have a ‘social security agreement’ with the UK then your State Pension will be paid at a flat rate and will not increase.

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