Pensions: five things to know before you go

Pensions: five things to know before you go

State pension increases

Your state pension will continue to be paid if you retire overseas but will you continue to benefit from any annual increases in the level of the pension? It will only continue to increase if you become resident within the European Economic Area (EEA) or in a country which has a special agreement with the UK. Some popular retirement destinations are not covered, for example, Australia. Inflation will reduce the buying power of your state pension if it doesn't increase to keep pace with rising prices.

Private pensions

Moving abroad should have no effect on the income you receive from a workplace or personal pension.

If your pension has built-in increases, these will continue regardless of where you move to. Currency fluctuations could impact on your actual income levels, though. Your private and state pensions are likely to be paid in sterling, while most of your expenses will typically be in another currency. A falling pound could see the buying power of your retirement income fall.

Before you leave the UK it may be a last opportunity to top up your pension and obtain tax relief at your highest rate on your contribution. Once you become non-UK resident the ability to make further contributions will be limited.


Becoming non-UK resident does not automatically mean that your UK retirement income is not subject to UK tax.

Income from UK pensions is subject to income tax regardless of where you reside. Tax may also be applied in the country you have moved to. However, many countries have a 'double taxation agreement' with the UK, which prevents your pension income from being taxed twice. Before you leave the UK it's essential that you inform HMRC. Any tax overpayments can then be reclaimed or any outstanding liabilities settled.

Transfer overseas

An alternative to leaving your pension in the UK is to transfer your pension to an overseas arrangement before you retire. This may mean that your pension is no longer subject to UK tax and pension rules and could help overcome problems with exchange rates. It is important to check that the overseas scheme that you transfer to is a Qualifying Recognised Overseas Pension Scheme (QROPS). Penalties of up to 55% will apply if the overseas scheme fails to meet the qualifying rules. HMRC publishes a list of QROPS but does not guarantee that all schemes listed meet the necessary criteria. A recent clampdown has seen a number of schemes removed from the list as HMRC continues to tighten the qualifying rules in an attempt to tackle perceived tax avoidance.

Death Benefits

What will happen to your pension should you die while living overseas? This will depend upon the type of pension and the scheme's own rules; some pensions may continue to be paid to your spouse after your death, or some may offer a lump-sum payment. With a lump-sum death benefit it is important that any death benefit nominations are kept up-to-date. If you do not advise your pension scheme who you would wish to benefit on your death, the scheme trustees may decide to pay thedeath benefit to your estate. In some countries this could mean that it is paid in accordance with local succession laws, which may not mirror your intentions.


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