UK Pension for Expats – How To Manage Your Retirement Funds While Living Abroad

In this guide, we’ll provide a comprehensive overview of how UK state, workplace, and private pensions work for UK expats. We’ll particularly focus on eligibility criteria, tax implications, and pension transfer options to help mitigate risks and optimise your retirement income.

What Happens to Your UK Pension When You Move Abroad?

You may retain, claim, or transfer your UK pension after relocating abroad. However, ongoing contributions, access, and tax treatment depend on the pension type and your residency status.

The UK pension system entails three primary pension types:

• State pension: A statutory retirement income provided by the UK government, calculated based on an individual’s National Insurance contributions.
• Defined benefit (DB) pension: An employer-sponsored pension scheme that provides a guaranteed income for life. It is determined by a fixed formula, typically a percentage of final or average salary multiplied by years of service.
• Defined contribution (DC) pension: A personal or workplace-based retirement savings scheme in which the final pension benefit is based on total contributions and investment performance.

Can You Still Contribute to UK Pensions While Living Abroad?

Yes, UK expats can contribute to UK-registered pension schemes under specific conditions.

For the state pension, expats may make voluntary National Insurance contributions. Class 2 contributions are typically reserved for those who are self-employed and have earnings below £6,725 annually, but eligibility depends on your previous UK residency and employment history.

Most expats instead make Class 3 contributions, which are available more broadly but at a higher rate.

You may also contribute to private and workplace pensions while living abroad. However, to receive UK tax relief on those contributions, you must qualify as a ‘relevant UK individual’, which includes anyone who:

• Is a UK tax resident;
• Has earned UK taxable income in the current tax year;
• Was UK-resident in one of the previous five tax years and contributed to a UK pension in that time; or
• Is a Crown Servant or the spouse/civil partner of one, with relevant UK earnings.

In the first tax year of non-residency, relevant individuals may claim tax relief on contributions up to 100% of their UK earnings (capped at the £60,000 annual allowance). After that, the maximum relief typically reduces to £3,600 annually unless UK earnings continue.

Do Expats Get State Pension While Living Abroad?

UK expats remain entitled to receive their state pension regardless of their country of residence, provided they meet the requisite age and National Insurance (NI) contributions conditions.

To qualify for the new state pension—applicable to those reaching state pension age on or after 6 April 2016—you need at least 10 qualifying years of NI contributions. These years can be earned through:

1. Employment
2. NI credits (received for caregiving or during unemployment)
3. Voluntary contributions

To receive the full state pension of £230.25 per week (for 2024/25), you must have 35 qualifying years.

When Can Expats Claim Their State Pension?

You become eligible to claim state pension benefits four months prior to reaching your state pension age, which is determined by your birth date:

Do Expats Get Pension Increases Overseas?

UK expats may benefit from annual increases—known as “uprating”—to their state pension, but only if their principal residence is within one of the following jurisdictions:

• European Economic Area (EEA) or Switzerland
• Countries with a reciprocal social security agreement with the UK

If you reside in one of the aforementioned countries, your state pension will increase annually based on one of the following factors:

• Average earnings growth across the UK
• Consumer Price Index (CPI) inflation
• A fixed rate of 2.5%

If you live in a country without a reciprocal agreement with the UK, such as Australia, your pension will be “frozen” at the rate first paid. It will not benefit from annual increases, reducing its real-term value over time.

How Can Expats Claim UK State Pension From Another Jurisdiction?

To claim UK state pension, expats must submit an application through the International Pension Centre (IPC) and provide their National Insurance number along with personal identification details.

Your pension entitlements may be paid into a UK or overseas bank account every four or 13 weeks. If you prefer to receive your payments in an overseas bank account, you will have to complete the IPC BR1 form and submit it to the IPC, along with your International Bank Account Number (IBAN) and Bank Identifier Code (BIC).

State pension payments are issued in pounds sterling (GBP) and will be converted into your local currency by the receiving bank. Consequently, the final amount credited to your overseas account may vary based on the prevailing exchange rates.

Can Expats Manage Private and Workplace Pensions From Another Jurisdiction?

UK private and workplace pensions can generally be retained while living overseas. These pensions remain under UK regulation and are administered by authorised providers, with oversight from the Financial Conduct Authority (FCA).

Expats may access their pension benefits from abroad, including the 25% tax-free lump sum available from age 55 (increasing to 57 by 2028). Benefits can be drawn as lump sums or structured income, depending on the scheme.

However, cross-border pension management presents unique challenges:

1. Currency volatility.
2. Cross-border tax taxation.
3. Inefficient management.

Currency Volatility

UK pensions are typically paid in GBP. As a result, regular currency conversions may expose your retirement income to exchange rate volatility, potentially reducing the real value of your pension benefits.

Cross-Border Taxation

Unless protected by a double taxation agreement (DTA), pension benefits may be taxed twice—in the UK and your country of residence.

While the 25% tax-free lump sum is generally exempt from UK tax, the remaining 75% may be subject to taxation in both jurisdictions if your country of residence does not have a DTA with the UK.

If you reside in a jurisdiction that does not impose income taxes and maintains a DTA with the UK, such as the UAE, you may not be subject to any tax on your pension income.

Inefficient Management

Managing multiple UK pension pots from abroad can lead to administrative inefficiencies, inconsistent investment strategies, and exposure to excessive fees.

Most defined contribution pension schemes entail an annual fee for investment and account management, capped at 0.75% of the pension fund’s value. While these fees are generally low, they may add up over time and significantly erode your retirement savings if you have multiple pots from previous employments in the UK.

Fragmentation also complicates withdrawal planning, tax optimisation, as well as foreign currency exchange management across jurisdictions.

To reduce tax inefficiencies and simplify cross-border pension management, UK expats should consider consolidating pensions into an internationally compliant structure. This can enhance tax optimisation, streamline access, and support long-term financial planning.

Advisers at Titan Wealth International specialise in cross-border pension transfers, offering compliant, tailored solutions that address the unique challenges of managing retirement assets from abroad.

How To Transfer Your UK Pension as an Expat?

The ability to transfer your UK pension depends on the pension type and the scheme’s applicable rules. Defined contribution and defined benefit pensions are generally transferable, but defined benefit pensions often require specific approvals before transfer. Conversely, state pensions cannot be transferred overseas.

UK expats can transfer their UK pension into several types of pension schemes, with the most prominent ones being:

Should You Transfer Your Pension to an International SIPP as an Expat?

An international self-invested personal pension (SIPP) is a UK pension scheme for expats offering increased investment flexibility, the ability to consolidate multiple pension pots, and enhanced control over retirement assets compared to traditional pension schemes.

However, whether you should transfer your UK pension to an international SIPP depends on your individual circumstances, risk tolerance, and long-term financial objectives.

If you are considering such a transfer, obtaining regulated financial advice is essential to ensure the decision aligns with your best interests. For transfers of DB pensions with a value exceeding £30,000, regulated advice is not only recommended but mandatory under UK rules.

What Are the Benefits of Transferring Your UK Pension to an International SIPP?

Transferring your UK pension to an international SIPP offers a range of strategic benefits specifically designed to support cross-border retirement planning, including:

1. Broader investment access: International SIPPs provide the ability to invest across a wide range of international markets and asset classes, facilitating portfolio diversification beyond UK-situs options.
2. Easier access: Expats can utilise flexi-access drawdown from age 55 (increasing to 57 by 2028), enabling custom income withdrawal strategies tailored to individual financial circumstances and objectives.
3. Effective tax planning: Leveraging double taxation treaties, international SIPPs can optimise tax liability by minimising exposure to overlapping tax regimes, increasing your net retirement income.
4. Tax-deferred growth: Investment returns within an international SIPP accumulate on a tax-deferred basis, enhancing long-term pension growth potential.
5. Multi-currency management: The capacity to hold assets in various currencies helps mitigate the risk of foreign exchange fluctuations, which is vital for expats.
6. Increased control: International SIPPs allow more direct management of pension funds compared to legacy UK schemes, offering greater autonomy over investment and withdrawal decisions.

Why Expat Pension Planning Requires Cross-Border Advice?

Cross-border pension management may involve several unique challenges, such as currency fluctuations, pension pot fragmentation, and the risk of double taxation.

Working with professional expat advisers can help address these complexities and offer the following benefits:

• Structuring pension withdrawals to minimise tax liability in both the UK and the country of residence.
• Transferring and consolidating fragmented UK pensions into a single, flexible retirement vehicle, such as a SIPP, for streamlined management.
• Ensuring compliance with HMRC and local tax regulations to avoid penalties and maintain regulatory compliance.
• Developing retirement income plans that respond to changes in residency.
• Managing exchange rate risks that may impact pension value and income upon distributions.