Why Can’t I Access My UK Pension Abroad

You might struggle to access your UK pension abroad due to various regulatory and financial hurdles. Depending on whether it’s a defined benefit or defined contribution pension, the rules, tax implications, and ability to find the right advice vary considerably.

Transferring a pension can encounter high international fees and adverse currency exchange rates. To properly manage this, you’ll need to consult a financial advisor who is well-versed in expat pension transfers and tax obligations.

Additionally, if considering a QROPS, verify its compatibility with your scheme and brace for potential tax charges. Understanding the challenges before you start will help you prepare the right steps to take.

How do I access my pension if I move abroad?

If you’re planning to move abroad, it’s important to explore the options for accessing your UK pension savings effectively and legally. Whether you choose to leave your pension pot in the UK or transfer your pension to your new country of residence, you should be aware of the different tax implications and regulations that come with each option, including those related to the UK state pension.

Leaving your pension in the UK can be simpler, but accessing your money may involve international transfer fees and potential currency exchange impacts when you retire abroad, which can significantly affect your financial planning. On the other hand, transferring your pension abroad might seem appealing, especially if you’re considering a move to a country with a Qualifying Recognised Overseas Pension Scheme (QROPS). This option can offer tax benefits and may simplify your financial management.

It’s also important to understand your UK State Pension when you reach state pension age and the way this is paid in your new country of residence. Many expats retain a UK bank account to accept pension payments, which providers often prefer.

Are you ready to transfer your Pension overseas? Take Our Expat Pension Quiz!

Why can’t I move my UK pension now I’ve moved abroad.

While you might’ve considered transferring your UK pension abroad, several regulatory hurdles can complicate this process once you’ve relocated. Initially, if you’re thinking about claiming your state pension, it’s important to understand that while the state pension can be claimed abroad, different rules may apply depending on your new country of residence. Issues such as whether your pension will increase with inflation depend largely on whether the UK has a social security agreement with your new country.

These are the countries and areas where inflation will still be paid:

• the European Economic Area (EEA)
• Gibraltar
• Switzerland
• countries where a social security agreement with the UK exists (except in Canada or New Zealand)

For private pensions, considering a Qualifying Recognised Overseas Pension Scheme (QROPS) might seem like a viable option. However, the tax implications can be significant. A 25% tax charge might apply to transfers if specific conditions aren’t met. Additionally, HMRC continues to apply its rules for ten years after the transfer, meaning you could face ongoing tax obligations in the UK even after leaving.

One of the biggest hurdles is if your existing provider, for example, Phoenix Life or Reassure, doesn’t offer pension income access. Many pension providers are used in the accumulation stage but don’t offer access to popular pension income strategies such as flexible drawdown. In this instance, people usually have to transfer their pension to another provider who offers drawdown pensions.

However, the problem exists if you are already living abroad, as most providers require proof of a UK residential address to set up the income plan. I speak to numerous expats who are frustrated and feel stuck in their schemes with seemingly no way to access the income.

However, some providers offer international SIPPs that specialise in accepting UK pensions for people living abroad. Schedule a call with me to find out more.

What options do I have to transfer my pension overseas?

You have several options for transferring your UK pension overseas, each with unique implications and requirements. One of the most suitable methods is moving your pension to a Qualifying Recognised Overseas Pension Scheme (QROPS). The QROPS system was specifically designed for such pension transfers, ensuring that your funds are transferred efficiently and in compliance with international regulations.

Before you consider a pension transfer, it’s important to check whether your current UK pension scheme permits transfers to a QROPS. You’ll need to complete Form APSS 263 and submit it to your pension scheme administrator. Be meticulous with the details, as any missing information can lead to a hefty 25% tax charge.

It’s also important to understand the tax implications involved. If the QROPS is located in the European Economic Area (EEA) or Gibraltar and you reside outside these areas, you might face a 25% tax. Conversely, if the QROPS is outside these areas and you live in the same country, there could be no tax.

Lastly, don’t forget to consult the UK government International Pension Centre. They can provide important information and assist you in dealing with the complexities of transferring your pension abroad, ensuring you’re fully informed every step of the way.

Are you ready to transfer your Pension overseas? Take Our Expat Pension Quiz!

Where can I invest my UK pension now I’ve moved abroad?

Having considered the mechanics of transferring your UK pension to a QROPS, let’s explore where to invest these funds once you’ve relocated abroad. Choosing where to invest your pension overseas requires careful consideration. When you transfer your UK pension, selecting a reputable QROPS provider is important. These providers offer various investment options that can align with your financial goals and risk tolerance.

Investing through a QROPS can provide flexibility, allowing you to tailor your investments to suit your new circumstances abroad. Depending on the specific QROPS provider and the regulations of the host country, you’ll find opportunities ranging from stocks and bonds to mutual funds and real estate investments. Understanding the tax implications associated with these investment choices is necessary. Different countries have different tax treaties with the UK, which can affect the efficiency of your pension investments.

The choice of investments is wide-ranging, and some are high-risk. Always speak with a qualified financial adviser who will have already conducted their due diligence on any recommendations they’ll be making. TIP: Some unscrupulous advisers abroad operate in a less regulated environment than the UK. Seeking advice from a UK FCA registered adviser offers more protection.

What tax do I pay on my UK pension when I’m drawing it abroad?

When drawing your UK pension abroad, the taxes you’ll pay depend heavily on both the UK’s regulations and the tax laws of your country of residence. Initially, up to 25% of your UK pension can be withdrawn as a tax-free lump sum under UK tax rules. However, this doesn’t automatically exempt it from taxation in your new country of residence; local tax laws and the UK government may still require you to pay tax.

For the remaining 75% of your pension, which is treated as income, your UK pension provider will deduct UK income tax. This could initially be at an emergency rate, potentially overestimating your tax obligation. It’s important to update your tax code with HMRC to make sure subsequent withdrawals are taxed correctly.

Moreover, the tax on pension income can be further complicated by the foreign pension payment rules in your country. To avoid the risk of double taxation—where both the UK and your country of residence tax the same income—check if there’s a double taxation treaty in place. Most of these treaties favour taxing pension income only in the country of residence. Informing HMRC of your non-UK residency and the relevant treaty can result in them stopping UK tax deductions on your withdrawals, aligning with these agreements.

Conclusion

Managing your UK pension from abroad can be challenging, but it’s manageable with the right knowledge and strategies. Make sure you’re familiar with the regulations in your new country and any tax implications.

If transferring your pension, explore all options and perhaps consult a financial advisor. Remember, staying informed and proactive about managing your UK pension will help secure your financial stability overseas.

Embrace your new adventure with confidence, knowing your finances are well arranged.

Book an appointment for my International Pension Transfer Service.