In the event of you moving overseas. You may decide to claim a UK pension overseas, in the country that you will rise in.
This could be to simplify your financial affairs. If you move all of your assets.
But the rules depend upon what types of pensions you have.
So let’s look at different pensions in greater detail.
The UK state pension:
Your state pension is based upon your National Insurance record and is normally separate form private and workplace pensions.
It is currently due at age 66, but is rising soon on a monthly increase up to age 67.
How do I qualify for state pension !
If you have a minimum of 10 years qualifying contributions, you should receive some state pension.
However to receive the full entitlement you ideally need 35 full years of NI contributions.
The DWP will write to you a few weeks of your state pension age to claim and put into payment.
It doesn’t come into payment automatically. On the 1st month, you will receive pro-rota amount. It is the paid every 4 weeks.
How to get a state pension forecast !
You need to create a government gateway account. It would then give illustrative figures for each qualifying year with expected amount and sate of commencement.
https://www.gov.uk/check-state-pension
The hardest part is confirming ID details through passport and driving license records.
If you have a shortfall you can address it. At present, you can backdate for he past 6 years.
So what happens if I move overseas ?
Ideally you must be within 4 months of your expected state pension age to claim.
You then contact the https://www.gov.uk/international-pension-centre,
or complete relevant forms to them directly on address shown on forms.
Bank accounts your pension can be paid into:
Your State Pension can be paid into either:
- a bank in the country you’re living in
- a bank or building society in the UK
You can use:
- an account in your name
- a joint account
- someone else’s account – if you have their permission and keep to the terms and conditions of the account
If you have overseas account:
You’ll need to provide your bank details. This could be:
- the international bank account number (IBAN)
- a Business Identifier Code (BIC), previously Bank Identifier Code
- a bank or brand code and account number
The amount will usually be converted into your local currency using the exchange rate at the time of the conversion.
There’s a conversion charge, currently 0.39% before payment.
When you’ll get paid:
You can choose to be paid every 4 or 13 weeks.
How does it increase in future:
At present the UK state pension amount is increased each April at the start of the tax year. Subject to the triple lock rules being:
- Minimum of 2.5%
- CPI figure as per September (in previous year)
- The average percentage increase in total wages across the UK (including bonuses) from May to July of the previous year
If you move oversees, not all countries will give an annual uplift. So check the rules for each country.
Your State Pension will only increase each year if you live in:
- the European Economic Area (EEA)
- Gibraltar
- Switzerland
- countries that have a social security agreement with the UK (but you cannot get increases in Canada or New Zealand)
You will not get yearly increases if you live outside these countries.
Your pension will go up to the current rate if you return to live in the UK.
What about the tax implications:
How much tax you pay, depends upon where you reside and your total income.
If you remain as classed as UK resident – it’s includes all relevant UK income.
If you are classed as overseas resident – You may be taxed on your State Pension by the UK and the country where you live. If you pay tax twice, you can usually claim tax relief to get all or some of it back.
If the country you live in has a ‘double taxation agreement’ with the UK, you’ll only pay tax on your pension once.
This may be to the UK or the country where you live, depending on that country’s tax agreement.
The rules may appear complex so you can speak to tax adviser in that particular country, or speak to Gov.uk directly.
How do I report a change in circumstances:
Report changes (such as a change of address or bank details) to the International Pension Centre by phone or in writing directly.
If you’re asked to fill in a ‘life certificate’
You may get a ‘life certificate’ form from the Department for Work and Pensions to check you’re still eligible for the State Pension.
You need to get the form signed by a witness. Check who can sign as a witness and follow the instructions on the form.
Your witness does not have to live in the UK or have a passport from any specific country.
Your payments may be temporarily suspended if you do not send the form back, within a specific timeframe.
What happens to other pensions that I have:
Defined benefits:
A defined benefit or final salary, is a guaranteed pension paid by a sponsoring employer from Normal retirement date (NRD).
The amount set is based on salary, length of service and accrual.
So it’ pays an income for lifetime or a spouse’s pension if applicable. The risk is borne by the employer to honour pension income a per the scheme rules.
It can be paid anywhere, but for ease most DB administrators will only pay funds into a UK back account for their ease and simplicity.
If you do fully move overseas, check with the admin team directly.
Normally it would be paid into your appropriate UK bank account directly each month.
It is usually then your responsibility to transfer oversees to that applicable account in question.
Which will be subject to costs currency risks, delayed timeframe. Which could prove to be expensive and cumbersome especially if you do it every month.
So it may be idea to keep a UK bank account to receive such payments.
You can the transfer funds overseas at regular dates to save fees, charges and currency risks.
Any income you receive from this pension. It should be taxed at source directly by the respective pension administrator.
They will be responsible for informing HMRC directly. Their is no need to complete self-assessment or deal with accountants unless you have other business income, rental income etc.
But it would be added to the other income received that tax year. So it may be worthwhile to consider which tax bracket you fall into.
See latest bandings via https:https://www.gov.uk/browse/tax/income-tax
Defined Contribution:
A defined contribution is the most common type available now. It could be personal or workplace through the introduction of Auto enrolment.
In that you and your employer make monthly contributions, plus tax-relief is added on your behalf.
But you are buying units in a fund which goes up and down on daily basis. The pension pot will have an accumulation value placed on the assets.
With this type of pension, you can access anytime after age 55 (MPA) or age 57 from April 2027.
However you have to buy a particular product from your pension provider to provide a source of income.
This could be in the form of:
- annuity (giving a guaranteed income) based on age and size of the pot
- Drawdown – you access the pot on your terms until it is empty
- UFPLS – a series of lump sums until pots runs out (but on each withdrawal 25% is tax-free & 75% is taxable)
- Full encashment – you don’t buy a pension product, may apply if you have a small pot.
With the exception of UFPLS, you normally receive the 1st 25% tax free on each pot.(Subject to limit of £ 268,275 across all schemes).
But any income you receive afterwards is the taxed at source.
Again by your pension provider, and normally into a UK bank account only for ease of administration.
So it is worthwhile keeping a UK bank account open, to receive such income or lump sum payments.
You can the transfer funds overseas at regular dates to save fees, charges and currency risks.
Any income you receive from this pension. It should be taxed at source directly by the respective pension administrator.
You can transfer a pension overseas:
If you do move overseas you can transfer a pension overseas to another country (with the exception of the USA – transfer embargo in place)
If you move a pot overseas, for DB pension the Trustees will provide a CETV figure normally valid for 90 days. If figure is over £ 30,000 the they insist that regulated financial advice is required by law to transfer pot elsewhere.
As long as the new pension is a “qualifying recognised overseas pension scheme’ known as QROPS. It will then meet the appropriate UK standards.
If it doesn’t then an appropriate tax surcharge may apply.
Before you transfer you should check:
- what benefits, if any you are giving up.
- Any fees, exit fees or applicable charges.
- How long will the transfer take to complete
- Do you need specialist pensions or tax advice.
- What fees, charges and options do you have in new format or country.
- What tax implications apply when accessing from a new country
You can find a relevant pensions or tax specialist via the FCA website or directory:
Be aware:
A simple DC pension in the UK can be done in a few days. If moving overseas it would be much more complicated and make take a few weeks or months to complete.
More information can also be found on http://www.gov.uk/tax-uk-income-live-abroad/taxed-twice
Remember:
If you found this blog post useful and informative check out my other posts on savings, investing pensions and investment books I recommend on https://moneyminted.co.uk
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