What happens to your pension when you move abroad?

Renny Popoola1st December 2016

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You’re planning to start a new life with a move abroad. You’re up to your eyeballs with frantic packing and farewell drinks. Thinking about what to do with your pension is probably the last thing on your mind. But making sure you understand what to do with it is important – it could end up saving you money in the long run.

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Your pension is safe if you move abroad

You arrive at the airport and suddenly remember you haven’t done anything about the pension you’ve been topping up for the last seven years. Don’t panic: you can keep your UK plan no matter where you end up moving to – and your money will be kept safe until you’re able to start claiming it. When this (finally) happens, there are a few options for getting your money, which we’ll come on to.

You can open a new pension abroad

If you’ll be abroad for a while, then you could transfer your UK pension into a new overseas plan. This requires a bit of homework as you’ll need to make sure that your new plan is a qualifying recognised overseas pension scheme. This means that it has been approved by the UK government and will help you avoid being charged extra tax.

If you only live abroad for part of the year you’ll need to decide which country you want your pension to be paid in. You cannot be paid in one country for part of the year and another for the rest of the year.

Combine your pensions

Moving abroad is stressful enough, the last thing you need is lots of different pension statements from your old employers – it can be a real pain to keep track of all your retirement savings.

It could make things much easier for you to bring all your pensions together in one place, and it could also save you money on fees. Generally, this can only be done with Defined Contribution pensions and not Defined Benefit pensions (also known as ‘final salary’ pensions).

Companies like Nutmeg can help you to combine all your previous pensions together, online. All you need to do is enter the policy details and they will do all the legwork to get your pensions transferred. Then you can log in anytime, from anywhere in the world, and see how it’s getting on – no need for any more annoying annual statements.

You can pay money into your UK pension while overseas

The good news is that even when you move abroad – or work for an employer that is based overseas – you are not limited in the amount of money that either of you can pay into a UK pension scheme. The bad news is that you might struggle to get the same amount of tax relief than if you’d stayed in the UK. There’s even a chance that you might not get any at all. Make sure that you check what type of tax relief you’re eligible for.

You can get your pension paid anywhere

Actually getting your pension might seem like a lifetime away, but it’s worth thinking about if you’re one day planning to move abroad. You can live anywhere in the world and still receive your UK pension, but providers won’t usually pay money into an overseas bank account – and if they do they’ll probably charge you for it.

Don’t fret, though. You can always ask for your pension to be paid into a UK bank account and simply withdraw money from cash points abroad using your debit card – or transfer money to your local account. This does mean you’ll be at the mercy of currency exchange rates, and could affect the value of your money. Using an exchange service like WorldFirst’s personal money transfer will give you a fixed, competitive rate.

Before you go, talk to an expert

Before you move abroad, it’s a good idea to call your provider and talk through your options. It might be that they can give you information about recognised schemes in the country you’re moving to – or offer advice on tax relief and paying into your plan from abroad. In any case, make sure to ask for regular updates from your provider so you don’t lose track of things.

There are also lots of places where you can get free, impartial advice. The Government’s Pension Wise website is a good place to start and the Pensions Advisory Service offers helpful, practical advice.

Risk warning: As with all investing, your capital is at risk. Pension rules apply.