If you’re thinking of packing up and chasing your foreign dream there are a few thing you should consider first. One thing you’re probably already asking yourself is “can I still get my state pension if I live abroad?” We’re guessing you have a lot more questions about this topic so we’ve put together a basic guide for retiring abroad in relation to your state pension. Read on to start planning the journey towards living your foreign dream.
- The deal with pensions
- Countries that offer UK state pension
- How to get your state pension paid abroad
- What about tax?
- What are the rules for company and private pension?
So, the good news is you can still get your state pension if you live abroad. To receive a full UK state pension you need to have made a minimum of 30 years’ National Insurance contributions during your work life.
If you qualify for the UK state pension you’ll be able to claim your pension abroad and could possibly even be able to arrange for it to be paid directly into your bank account. However, you must remember that the age that you can start to get your state pension may be different in other countries.
The (potentially) bad news is you’ll only qualify for pension increases if you live in a country with which the UK has a reciprocal agreement. This includes all the European Economic Area (EEA) countries, and the USA, plus a few other countries around the world. If you live outside of these areas, you won’t receive yearly increases. Among those not covered are Australia, New Zealand, Canada and South Africa.
- You need to let your local authority know where you’re going and give them the details of a bank or post office abroad where you want to get your cash.
- You’ll need to make similar arrangements if you’re hoping to receive any personal or occupational pensions. The Pensions Advisory Service on 08456 012923 should be able to help with any queries. Also try the International Payments Office on 0191 218 7777 or get more information at GOV.UK.
- You can get a forecast of how much state pension you’ll be entitled to if you live abroad by filling out form BR19 – see the HMRC website.
- If you’re sent abroad by your employer, you can stay in your UK company pension scheme. Expats can carry on paying into a UK personal pension for up to five years.
- Consider continuing to pay voluntary National Insurance contributions in order to get your state pension.
- People who move independently are allowed to pay into a British pension and get tax relief on their contributions for up to five years after leaving the country.
You may have to pay tax on your state pension, although that’s unlikely if this is your only source of income from Britain. However, if you also have an occupational pension, that and the state pension will probably put you over the limit for paying tax.
If you’re planning on retiring abroad you’ll need to tell HMRC so they can work out your tax liability in the UK and to see whether you’re owed a tax refund. If you are owed a tax refund HMRC will send you a P85 form. Remember – the amount of tax each individual pays depends on their personal circumstance.
To find out more about paying the right tax when retiring abroad you can visit the HMRC website or the Pensions Advisory Service. Alternatively, to talk to someone about how this might affect you, contact the International Pension Centre. Contact details can be found here.
So in relation to company and private pensions the rules are pretty similar. You can get access to your pension when abroad, normally you take the benefits which are paid into a UK bank account and are then paid across to your new country of residence. However, there is exchange rate risk here when the sterling pension payments are converted to the new currency. Tax depends upon a number of issues. Your pension provider will normally deduct UK tax unless told otherwise by HMRC and the actual amount of tax paid depends upon the tax rate of the country you are living in and what double taxation agreements there might be.
Danny Cox from Hargreaves Lansdown, one of the UK’s leading independent financial service providers recommends transferring your pension fund to an overseas pension. He says – “If your pension fund is big enough you could consider transferring this to an overseas pension such as a overseas pension scheme (QROPS). The advantage here is that you can have your pension paid in the currency where you are now living saving the exchange rate risk, however, the costs of these schemes can be high.” To see a full list of qualifying overseas pension schemes click here. For more advice about pensions and retirement abroad click here.
- Age UK – a guide to retiring abroad and your options
- Pensions Advisory Service
- State pension information from GOV.UK
- International Pension Centre
- Full list of the EEA countries
- Which? guide to retiring abroad and your pension
- Retirement savings at any age
- Help for over-50s: how to save if you’re broke
- Easy ways to supplement your pension