Expat Pensions Frequently Asked Questions

19 September 2016 - Posted by ebaxter

Q: What is a Double Tax Treaty (DTT)?

In some cases, income earned is taxed both in the UK and the country in which you are a resident. DTTs are set up between the UK and certain countries to avoid this situation. Under a DTT, you will only pay tax on your pension to the country in which you live. 

Q: What pensions are available for expats?

  • UK state pension: If you have paid sufficient National Insurance contributions you will be able to claim a UK state pension.
  • Foreign state pension: In certain circumstances, you may also be able to claim a state pension from the country in which you are resident.
  • QNUPS: Paying into a Qualified Non-UK Pension Scheme allows you to benefit from certain types of tax relief, for example, on inheritance tax. To find out more, talk to your IFA.
  • QROPS: You will also have the option of transferring money accrued in a UK pension into a Qualifying Recognised Overseas Pension Scheme. This offers similar benefits to a QNUPS.

For more details on the best pension for an expat, talk to your IFA.

Q: What happens when a pension is frozen?

Normally, the UK state pension increases on an annual basis, keeping up with rises in the cost-of-living. Frozen pensions in the context of living outside the UK refers to a state pension that has been set at the level it was at when you left the county. The rules are different depending on where in the world you are a resident. In some countries, you will benefit from the same increases as those living in the UK. Talk to your IFA for more details about frozen pensions.

A frozen pension can also refer to a pension pot that has amassed as part of a workplace pension you once belonged to in a previous job. Though you no longer make any contributions, it will be available for you to draw from come retirement.

Q: How will Brexit affect expat pensions?

There is no clear evidence yet that Brexit will affect pensions, for those either living home or abroad. However, the amount of state pension received by UK expats living in the EU currently increases in line with inflation, unlike the pensions of certain non-EU expats. This could be reviewed in the future. If you have concerns about the effects of Brexit, speak with your IFA.

Q: What is a QNUPS?

QNUPS stands for Qualified Non-UK Pension Scheme. It is an HMRC-regulated pension scheme that allows wealth to be invested abroad. There are certain benefits to be gained from a QNUPS, such as zero Inheritance Tax and growth that is free from Capital Gains Tax.

Q: What is a QROPS?

You can transfer an existing pension, or multiple smaller pensions, into a scheme based outside the UK known as a Qualified Recognised Overseas Pension Scheme (QROPS). This can be done without incurring certain charges. As well as a number of tax benefits, this HMRC-recognised scheme also offers you more control over your money, including: how much money you receive as a regular payment, the ability to move it to a country with low tax requirements, and choosing who it is transferred to after death. 

Q: What is a SIPP?

A Self-Investment Personal Pension (SIPP) allows you, or an authorised investment manager of your choice, to choose where your money is invested.

Q: Do I still get a state pension?

Yes. If you paid enough National Insurance contributions while living in the UK you will be able to claim the state pension. If you only live part of the time abroad, you cannot claim from both countries. You will have to decide which country you want the pension to be paid in.

Q: I now live in Canada. Will I receive annual increases to my state pension?

No. Canada is one of several countries where your state UK pension will not increase if you are a resident there. To find out the countries you can live in and still receive annual increases to your pension, speak with your IFA.

Q: How will retiring abroad affect my pension?

As previously mentioned, your state pension will only increase each year if you reside in certain parts of the world, namely:

  • The European Economic Area (this has not been changed by the result of the 2016 EU referendum)
  • Switzerland
  • Countries that hold agreements with the UK

  • If you are classed as a UK resident for tax purposes, you may have to pay UK tax on your state pension. If you are not a UK resident, you will not normally have to pay UK tax on your pension, though you may have to pay tax to the country in which you are resident.
  • If you have a workplace pension, your pension pot will not be affected; you will still receive your pension and you should be subject to any rises you may receive if you lived in the UK.
  • If you decide to take an annuity, you should check to see if there is any extra charge for an overseas payment.

Q: I have decided to retire abroad. Whom should I inform?

It is advisable to contact the International Pension Centre. You should also speak to you IFA before you make a decision.