Whether you’re tired of the UK’s political climate or simply fancy living in a warmer, sunnier place, retiring abroad is an option for many.
But what does being an ex-pat mean for your pension and taxes? If you’re wondering whether you can still claim your State Pension, how your lump-sum payments will work, and what exchange rates could do to your retirement finances, you’re in the right place.
Here’s your quick and easy guide to help you decide whether you want to retire abroad.
- A word about Brexit
- 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?
- Do you have enough money to retire abroad?
At the time of writing, the General Election 2019 results had been announced mere hours ago. The Conservative majority means the big issue of Brexit now looms in the very near future.
There’s still a lot of uncertainty about what Brexit will mean for people retiring abroad from the UK. When this information changes or becomes clearer, we’ll be sure to update our website to give you the most accurate details possible.
The big thing to note about Brexit and retirement is whether you’ll be eligible to move abroad permanently. You may need to apply for visas to live in, or visit, EU countries. At present, this doesn’t affect your pension rights – but we’ll keep you posted.
If, however, you’re an EU citizen who has been living in the UK for a long period of time, and paid your National Insurance contributions, your rights to a State Pension may change. Depending on whether the UK leaves with or without a Brexit deal, your rights may change on 31 December 2020 or 30 June 2021.
It may come as a surprise that you can still claim your State Pension when you’ve moved abroad.
As long as you’d be eligible for a State Pension in the UK, you can claim from anywhere in the world. You’ll need to arrange for the payment to go direct to your bank account.
Register with the International Pension Centre before you move abroad to set up your claim. You can submit your claim for the State Pension up to four months before you reach State Pension age.
At the moment, UK citizens retiring to countries in the European Economic Area (EEA) countries, the USA, and a few other countries with a social security agreement with the UK.
This could all change with the advance of Brexit – but at present, the agreements still stand.
It means you’ll receive increases in the State Pension just as you would if you lived in the UK. If you’re living in a country that doesn’t offer a reciprocal social security agreement, you can still claim the State Pension but increases will be frozen.
If you’ve worked abroad for some or all of your career, you may be eligible for the state pension equivalent of the country you worked in as well as the UK State Pension. As long as you meet the full National Insurance contributions and eligibility requirements, you won’t lose your UK State Pension if you claim an equivalent from another country.
Here’s some vital information on getting your state pension paid abroad:
- Check your State Pension forecast online or contact the Future Pension Centre if you’re claiming your pension in more than 30 days’ time. You can also fill out the BR19 form to request a forecast by post.
- 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.
- 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.
- 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 or personal pension, the combination of these 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.
Taxes get more complex as you have more income sources. For example, if you’re only claiming the State Pension, it’s quite straightforward. But, if you have several pension pots and an investment property, tax is complex. We recommend speaking to an independent financial adviser specialising in retirement and pensions before you make any decisions.
If your UK employer sent you abroad, and pays you into a UK bank account, and deducts UK taxes, you can continue to pay into your pension scheme as normal.
When it’s time to withdraw your company pension, tell your provider that you’re moving abroad. They’ll be able to make the necessary arrangements to make sure you get paid, with the relevant UK tax deducted as normal. Remember: you’ll need to check the tax rules in the country you’re moving to, as well as UK tax rules!
However, it may be better for you to transfer your pension to an overseas pension plan instead.
Danny Cox from Hargreaves Lansdown 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 qualifying overseas pension scheme (QROPS). You can have your pension paid in the currency where you now live, 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.
Some people retire abroad for the sunshine, others for a luxury lifestyle. Others move to places with lower living expenses.
Before you make the decision to retire abroad, make sure you’ve done the sums. There are plenty of ways you can boost your retirement income – try these articles for ideas!