The lowdown on state pensions for British expats
Whether you’re already overseas or are planning to retire overseas, understanding your state pension as a British expat is important. It’s also pretty confusing. Here are some things to consider.
In this article, we’ll answer some of the most frequently asked questions on this topic to help you make sense of your finances and future.
Can you still claim your state pension if you live abroad?
Most of the time, people can still get their state pension abroad.
There are three types of pension formats for expats. These are state pension, workplace pension, and private pension. You should be able to access all three abroad if you have them.
When people move abroad, what happens to their private pensions?
Private pensions should be accessible no matter the country you live in. What’s more, any annual increase eligibility will still apply. A private pension, therefore, should be exactly the same as it would have been if you were living in the United Kingdom to receive it.
If I live abroad, what will happen to a workplace pension I have?
Like a private pension, it shouldn’t matter where you live for you to receive the income from it. Like private pensions, you will also still be eligible for the annual increases, where applicable, and you will receive it just as you would if you were still a UK resident.
What happens to your state pension when you’re an expat?
As an expat, you can receive, claim and contribute to your state pension in the UK. However, living abroad does affect Pension Credit.
As an official overseas resident, you are no longer a UK resident, which means your Pension Credit will stop. What this means is that you will no longer be able to access any benefits that are means-tested that top up your income.
Do you pay tax on a pension from the UK if living abroad?
Possibly. Whether or not you pay tax will depend on your income from your pension or pensions. How much you pay (or whether you pay tax at all) will be decided by your new location. Non-UK residents can still receive their personal tax allowance. What’s more, the United Kingdom also has agreements in place with a lot of countries so that you won’t be taxed twice on your income (i.e., in the UK and in your new country).
The government website has a list of all of the countries where double taxation agreements are in place.
What happens if I move out of the UK before I start to receive my pension?
If you decide to move, you should get in touch with all your pension providers before moving.
You need to make sure you’re aware about fluctuations in currency too. Falls and rises in currency values can affect how much your pension is in your new country.
Depending on where you plan to go, you might want to come up with a plan for what you’ll do should the pound weaken against the local currency.
It’s a good idea to always have an emergency fund and plan for these situations.
Can you get a UK pension paid into a bank account abroad?
Some providers in the UK will agree to pay into a bank account abroad while others insist you get pain into your bank account in the UK.
Can you contribute to a UK pension as a non-resident?
This depends on your pension. Some providers will allow this, while others won’t. However, it is very unlikely that you’ll have the same tax-relief benefits as you would if you lived in the UK.
Can you qualify for tax relief as an expat?
No. The majority of expats aren’t eligible to claim tax relief on their pension contributions.
You can only do this if:
- You’re a UK resident
- You have UK earnings and have paid income tax in the UK during the tax year
- You were a UK resident in the five previous tax years and became a member of a pension scheme registered in the United Kingdom
- Your civil partner/spouse or you are a crown servant and are receiving income that is subject to tax in the UK.
Final thoughts on pensions for UK expats
Understanding pensions in the UK is complicated enough without throwing being abroad into the ring! The bottom line is, that if you already have a state pension, workplace pension, or private pension, you should be able to receive income and contribute regardless of your current location.
Will is an Independent Financial Adviser with over a decade of experience helping expats make the most of their international status.