If you move abroad, you are still entitled to your pension income – and you may well find it goes a whole lot further. That said, it needs planning to maximise what you’ll get; here’s what you could do.
How can you claim your pension abroad?
If you buy a house or otherwise move abroad, you can still keep receiving your UK pensions.
- State pension: If you’re moving to the EU and you move before the end of the transition period, you can receive your state pension as now and have it uprated every year for as long as you live there. If you move afterwards, you will be able to receive it, but we don’t yet know if it will be uprated – this will depend on the outcome of the negotiations throughout 2020.
- Private pension: You can continue to receive your private pension when you move abroad, but do be aware that some providers will only pay it into a UK bank account.
What are your options to transfer your pension income abroad?
If you receive a state pension, then this will be paid either into a UK bank account or a foreign one; in the case of the latter, it will arrive in foreign currency.
You need to inform the International Pension Centre once you move. If you have a holiday home or otherwise spend part of the year abroad, you can choose to have the pension paid in the UK or in the second country (but not both).
Many private pensions will only be able to be paid into a UK bank account. Some will pay directly into your foreign account, but you have no guarantee how much money you’re going to get in advance, as the exchange rate will be whatever it is on that day.
In that sense, it can be a safer option to send it to your UK bank account, even if you have the option to receive it abroad. Then, with the money in pounds in your account, you can use a more risk-free method of sending it over.
Protecting your pension abroad
For many people, this more risk-free method is what is known as a forward contract.
This is where you lock in the same exchange rate for twelve months – so when you make payments throughout the year for your pension, each of them will be worth the same as the last, even if the ‘live’ exchange markets have suddenly dropped. It could save you from losing hundreds from your pension.
It’s simple to set up. You call your Personal Trader, who discusses and explains your options to you. Once you’ve agreed on an exchange rate and total amount of money for the twelve months, you pay a deposit of that total amount. Smart then buys the whole amount of currency on that day, at that exchange rate, and you can pay for and receive the rest as you receive your sterling pension throughout the year.
Eliminating the hassle of moving your pension
If the idea of making frequent payments every time you receive your pension income doesn’t appeal, we can help you. Our Regular Payment Plans (RPP) allow you to automate the transfer process and schedule payments in advance – including with a forward contract, if you have already agreed on a fixed rate.
Forward contracts for peace of mind; regular payment plans for ease of use.
As our Senior Trader Barney Cotton says, ‘Our clients use forward contracts for peace of mind and RPPs for ease of use’.
Will you pay tax on your pension abroad?
In the UK, you can take up to 25% of money from your pension pot tax-free. However, if you receive it directly abroad, you may have to pay tax on it. Whether or not you benefit from that 25% by paying it into a UK bank account after moving abroad will depend on a number of factors, including your country of tax residency. In some cases, if you’re planning on drawing down that 25%, it can be worth taking it before you move, to benefit from British rules. You can then, as above, work out how to send it over safely at a later date, once you’ve moved.
To discuss further with your Personal Trader how we can help you get the most out of your pension income overseas, give them a call today on 020 8108 5337. If you haven’t yet opened an account, do so today with our easy online form.