Retiring abroad and your UK pension
Find out how your UK Private pension and UK state pension is paid and how your other retirement savings are affected when you retire abroad.
Retiring abroad with a UK state pension
The basic state pension for 2020-21 is £134.25. To get this under the old system, you need to have made a minimum of 30 years’ National Insurance contributions during your working life.
Those qualifying for the state pension on or after 6 April 2016 will be covered under the new state pension which is £175.20. Once you qualify for the UK state pension, you can claim it no matter where you live.
The money can be paid into a UK bank or directly into an overseas account in the local currency, cutting out transfer fees and bank charges.
You can choose to be paid every four or 13 weeks, but if your State Pension is under £5 a week, you’ll be paid once a year in December.
Can I get state pensions from two countries?
If you move abroad before retirement and work there for a number of years, it may be possible to receive the state pension from more than one country. This might change when we leave the EU.
However, you will not be entitled to any increases that people living in the UK receive, unless you are moving to a country in the European Economic Area (EEA) or one with which the UK has a social security agreement.
The UK has these agreements with some countries, including Barbados and Mauritius, but not Australia, New Zealand or Canada.
Retiring abroad and private pensions
Private pensions are normally paid in sterling into a UK bank account. You can transfer this to a foreign bank or arrange for a currency broker to convert it before the transfer. This is often cheaper than paying bank fees.
Another way of avoiding transfer charges is to set up an international account. If you have sterling and euro accounts with the same bank, there should be no fee when you transfer from one to the other.
By using a currency specialist, it is possible to agree a fixed exchange rate, where rates are set up to a year in advance. This can be particularly useful if you want to avoid any sudden fluctuation in your purchasing power.
Unlike banks, currency brokers are not covered by the Financial Services Compensation Scheme, so it’s important to make sure that any you use are fully authorised as a payment institution by the FCA.
Authorised institutions are obliged to ring-fence customers’ money in a separate account, so it is safe even if they were to cease trading.
Retiring abroad and early retirement
If you have retired early, or have yet to start drawing a pension, You can transfer your Uk pension overseas.
You can do this in two ways.
You can do this by a transfer of your UK pension to a Qualifying Recognised Overseas Pension Scheme (QROPS). These can be based in the new country you are moving to, or set up on an offshore basis. They offer some flexibility and, once you have been a non-UK resident for five years, are outside the UK tax net. The income from QROPS may also be taxed favourably in your country of residence, although the UK pension changes have reduced the appeal of QROPS.
You can also choose to transfer your UK pension to an international SIPP. The International SIPPs offer a wider range of investment funds which are more globally focused and in many currencies. This is in contrast to domestic SIPPs, where fund choices are more limited to the UK and are also denominated in Sterling.
SIPPs are an ideal way of consolidating the various personal pensions that individuals accumulate during their working life. Such consolidation reduces administrative complications further down the line. This is true for both UK and International SIPPs, although arguably more important to expats.
Advice should be sought from a specialist financial advisor such as Atlantica Wealth who can advice you on what would be the most suitable option for your own circumstances.