How does retiring or moving abroad affect my pension?

If you’re entitled to a UK state pension then retiring abroad won’t change that. You’ll still receive the UK state pension and any workplace or private pension income.

In this guide we take a look at the rules affecting your state pension if you move abroad. We also answer common questions like “can I get my state pension if I live abroad” and “are there any changes since Brexit?”

Can you get a state pension if you live abroad?

You can still get your UK state pension and any other private pensions you’ve paid into if you are retiring abroad.

UK state pension entitlement is based on your contributions to the UK national insurance system. If you’re entitled to a UK state pension then you can still claim it while living abroad. You won’t get any increases in state pension unless you live in the European Economic Area (EEA), Switzerland or countries where the UK has a social security agreement (apart from Canada and New Zealand). If you move back to the UK, your state pension will increase to the current rate.

You’ll still receive any private or workplace pensions while you’re abroad and you’ll still be entitled to any annual increases while you’re abroad.

What you need to do if you move abroad

Here’s what you need to do if you already receive a pension and you are retiring abroad:

• Inform the international pension centre or the Northern Ireland pension centre.
• Give your workplace or private pension provider details of your new address and any new bank account details.
• Check the government website to find the relevant tax claim form. This is because you may end up being taxed twice on your pension income and need to claim back the overpayment.

What you need to do before you leave the UK

It’s important to get independent financial advice before you leave the UK. That’s because tax rules are different in other countries and it may make sense to take action and plan for any tax charges before you move abroad.

For example, in the UK your main residence is usually exempt from capital gains tax, but that may not be the case in another country. That means you could be hit with an unexpected and hefty tax bill.

Bank accounts your pension can be paid into

Your state pension can be paid into any UK bank or building society, or a bank in the country you are living in.

You can also pay a private pension into any bank account. However, some providers might only authorise payments into a UK bank account or charge extra bank fees for payments into a foreign account. You will need to provide details of your international bank account number (IBAN) and bank identification code (BIC) if you have a foreign bank account.

When you’ll get paid your state pension

You can choose to be paid every 4 weeks or every 13 weeks. If your pension is less than £5 per week then you’ll be paid once a year in December.

If you live abroad then local bank holidays can cause a delay to your pension payment. That’s because local banks process the payments when they are working.

How to claim state pension abroad

You can claim a state pension abroad by contacting the international pension centre. You can’t claim until you’re within 4 months of qualifying for a state pension which is currently 66 years old for men and women.

Can you pay into the UK state pension while you live abroad?

You will not build up entitlement to a UK state pension while you live abroad. That’s because you won’t be paying UK national insurance contributions.

However, some countries have a social security agreement with the UK where you can count contributions to their social security system towards your UK pension entitlement.

Do you pay tax on your UK pension if you move abroad?

You may need to pay UK or foreign tax on your UK pension income if you are retiring abroad. This depends on the tax arrangements between the UK and the country you live in.

Some countries have a double-taxation agreement with the UK government. This means you will only pay tax on your UK pension in one country, which could be the UK or the country you live in, depending on the agreement. You’ll need to fill in a claim form on the government website to claim back any tax you have overpaid.

If you live in a country without a double-taxation agreement you’ll need to fill in a standard claim form and send it to the country where you are resident.

Are you still entitled to a UK personal allowance if you’re retiring abroad?

You are entitled to a UK personal allowance if you’re a UK resident for tax purposes. This may be the case if you live in the UK for more than 183 days per year.

Moving before you begin taking income from your private pension

If you move abroad and you’re contributing to a UK workplace or private pension then you have 2 options:

• Stop paying into your pension and wait until at least age 55 to start taking your pension.
• Continue paying into your pension; however, the tax relief on your pension contributions might change, depending on the rules of the country you live in.

Once you begin taking your pension, you will usually have the same options as if you were living in the UK.

Can you save into a UK private pension plan if you live abroad?

You can save into a UK private pension scheme when you live abroad but you may not get tax relief on your pension contributions in the same way as in the UK. To get UK tax relief you need to be classed as a relevant UK individual during the current tax year.

Do you qualify for tax relief on your private pension contributions?

The rules on UK tax relief depend on your personal circumstances. To get tax relief you must be classed as a relevant UK individual during the tax year. That means that one of the following applies:

• You have relevant UK earnings in the current tax year
• You were resident in the UK at some time during the last 5 tax years and were also resident in the UK when you joined the pension scheme
• You or your spouse are a crown servant

Tax relief on pension contributions is limited to the higher of:

• UK taxable earnings for the current year
• Gross earnings of £3,600

Tax relief also depends on your annual allowance which is £40,000 for most people but may be lower if you’ve already started to draw your pension.

Transferring private pensions when moving abroad

If you’re thinking about transferring your pension then it’s important to get independent financial advice.

If your pension plan is a Qualifying Recognised Overseas Pension Scheme (QROPS) then it may be possible to transfer your UK pension to an overseas scheme.

Are there any changes since Brexit?

Changes to pension rules since Brexit may affect people who have previously lived in Australia, Canada or New Zealand.

From 1 January 2022, you can no longer count periods living in Australia (before 1 March 2001), Canada or New Zealand towards calculating your UK State Pension if both the following apply:

• You’re a UK national, EU or EEA citizen or Swiss national
• You move to live in the EU, EEA or Switzerland on or after 1 January 2022

What happens if you live part of the year abroad?

If you live abroad for part of the year you must choose which country you want your pension to be paid in. You can’t switch payments back and forth between countries.

Are there any benefits of having your pension abroad?

There are not usually any benefits to receiving your pension abroad. Your state pension will not increase in line with inflation (unless you live in certain countries), leaving you feeling poorer over time. Your income may also be subject to extra bank charges if it is paid into a foreign bank account.

If you live in some countries then the local currency may have more spending power than in the UK. That may mean that you feel slightly better off living in that country than in the UK.

Bottom line

If you’re thinking of retiring abroad then it’s good to know that you’ll still receive your UK state pension income and any other private pension income.

For most people, it’s a good idea to take advice from a financial advisor as there may be financial implications to moving abroad that affect your pension and other wealth. Capital gains tax and income tax rules are different across the world and you might be able to take action to avoid tax charges.

Frequently asked questions

• Will I lose my state pension if I move abroad?

  No, you will not lose your state pension if you move abroad. However, you will not receive inflationary rises in state pension in many countries.

• Who do I need to tell that I am leaving the UK?

  You need to tell your pension providers and any relevant government departments that you are leaving the UK. They need to know up-to-date contact details and your country of residency may affect your tax.

• Does my UK state pension increase if I live abroad?

  You won’t see your state pension increase unless you live in the European Economic Area (EEA), Switzerland or countries where the UK has a social security agreement (apart from Canada and New Zealand). If you move back to the UK, your state pension will go up to the current rate.

• Do I pay tax on my pension if I live abroad?

  You will pay tax on your UK pension income if you live abroad and some people end up paying tax in the UK and the country they live in. You need to fill in a claim form from the government website to claim back any overpaid tax.

• Can a UK state pension be paid into a foreign bank account?

  Yes, your UK state pension can be paid into a foreign bank account.

• How long can pensioners stay abroad?

  Pensioners who are retiring abroad can stay overseas for as long as they like. However, they may feel poorer over time as in many countries the UK state pension won’t go up with inflation.

• Can I claim state pension in 2 countries?

  If you’ve lived and worked in more than one country, you may be able to claim a state pension in both countries. Depending on where you live, you may need to make more than one pension claim.