A British expat query, from those that have contributed to pension schemes in the UK, is often about the possibility of continuing to contribute to UK pensions while outside the UK.
The answer is ‘It depends’. If the British expat still has relevant UK earnings, then ongoing contributions are still possible. The limit being the greater of £3,600 pa ( gross ) and 100% of their earnings up to £40,000 pa.
However, it is usually the case that a British expat does not have UK relevant earnings and is just taxed in the host country. In these cases, the British expat will only be able to receive tax relief on personal contributions of up to £3,600 gross pa for five full tax years following the tax year in which he/she moved abroad.
Before Becoming a British Expat
For those without a personal pension, or those leaving final salary pension schemes, it may be a good idea to set up a low cost personal pension in the UK before becoming non-UK resident. Typically, the lower cost personal pensions in this case will not open a pension for someone after they have become non-UK resident.
Even if the British expat does not have relevant earnings, is it worth setting up such a pension with relatively modest levels of contributions for only 5 years.
Let’s look at an example of a 35 year old British expat, planning to retire at 65, who pays £3,600 ( gross ) pa for 5 years and then stops and lets the fund grow to 65. If we assume 5% pa (after charges over the longer term), the fund could be £70,000 at 65.
Further, as UK tax relief would apply on the contributions, the initial £18,000 contributions would have only cost £14,400.
Given the extremely good value of lower cost UK personal pensions, this should be given consideration.
Look after the pennies, and the pounds look after themselves.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
This article was published on 15th March 2018
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