If you’re thinking of retiring abroad and want to transfer your pension, or you’re moving abroad and continuing to work, and have a few questions around your pension, you’re in the right place. We’ve gathered here an overview of the current UK and overseas pension rules. And, we’ve thrown in some potential money saving tips for your international currency transfers too. The better the exchange rate you can achieve when transferring your pension abroad, the more return you could get. We’ll show you how, with some simple tools, you can gain more control over your budgets and your pension even while living abroad.
Do I even need to move my pension at all?
Good question. If you’re moving abroad and need to make a decision about your pension, you should always seek advice from an independent financial advisor (IFA). There are more options available to you than ever before, and an IFA can help you determine the best options based on your individual circumstances.
If you do decide to transfer your pension abroad, then we can help!
Can I transfer my pension to a new country of residence?
Through what are known as Qualifying Recognised Overseas Pensions Schemes (QROPS) – overseas pensions which meet the rules of where they are located – you can have your pension paid into a bank account in your new country of residence.
Once you have become a tax resident in your new country of residence, you can transfer your pension fund from the UK into your QROPS just as you would between pension providers back home.
You needn’t worry about transferring your work pension scheme as you can transfer most types of pension, including personal pensions and those opted into through work.
I work abroad – can I pay into a pension scheme back home?
If you’re working overseas, but want to pay your pension into a scheme which is based in the UK, there is no longer any limit on how much you’re able to pay into a UK pension scheme. However, you should be aware of any limitations on tax relief you can claim, and the exchange rate could affect how much of your money actually makes it back into your pension.
You may also be eligible to claim a State Pension from the country you are living in, if you are paying into its state pension scheme. Do seek independent financial advice to determine your eligibility to claim.
I live overseas—can I still receive a UK State Pension?
It’s possible to live in another country and receive a UK State pension, but you should be aware that you will only be eligible to receive pension increases each year if you live in the European Economic Area, Switzerland or a country that has an agreement with the UK. Otherwise, you won’t get annual increases, unless, of course, you move back to the UK.
So far there haven’t been any changes to the pension rights of UK nationals living abroad in the EU resulting from the referendum, but of course this may be subject to change as formal agreements are finalised.
How can I make the most of my money abroad?
If you’re transferring your pension from the UK to your new country of residence, you should pay close attention to the exchange rates – dramatic fluctuations one way or the other could impact the amount you receive. Exchange rates can change significantly, and sometimes in a short space of time. By managing your currency transfers, and perhaps even fixing your rate, there should never be any nasty surprises, and your money could end up going further.
With what’s called a forward contract, you can pay a deposit and lock in an exchange rate. You’ll then be unaffected by exchange rate movements during the defined period of the contract. A forward contract protects your exchange rate should the markets move against you and allows you to budget and plan ahead knowing exactly how much you’ll receive. However, should the exchange rates move in your favour, you won’t be able to take advantage of the improved rate.
How have pension rules changed since the 2015 sweeping reforms?
The rules on pensions which kicked in back in April 2015 give savers more freedom over what they do with their money. Before, during the first few years of your retirement, you’d probably use the money that you’d saved during your working life to buy an annuity from an insurance company. While you were previously able to take 25% of your pension in a tax-free lump sum, the rest of the money automatically went into that annuity.
Under the revised rules, for those aged 55 or older who have a defined contribution pension, you no longer have to spend the remaining 75% of your savings on an annuity. You don’t have to buy one at all if you don’t want to, and you’ll be given free advice to help you make the decision which makes sense for you.
This has allowed people to take a number of smaller lump sums instead of one big one, with 25% of each of these smaller payments being tax-free.
So, if you’ve dreamed of retiring abroad to a place in the sun, these pension reforms could offer you the flexibility to make your international property dreams a reality. Then, should you wish to move your pension to a new country of residence, it’s worth speaking to a currency specialist. A better exchange rate could mean your money goes further. Speak to the experts at World First about your requirements, and to find out how you can gain some peace of mind and control over your international pension payments.