UK pension- are you outside the UK?

Whether working abroad temporarily, for a fixed term, or as a permanent resident, expat pensioners must navigate through a myriad of complicated financial considerations. There are several key issues that could affect a retiree’s pension scheme: lifetime allowance, the second state in which you work, U.K. National Insurance Contributions, and the length of time you work abroad.

What is the Lifetime Allowance and How Will it Affect My Taxes?

According to the U.K. National Health Business Service Authority (NHBSA), The lifetime allowance refers to the total benefits you can build up from all registered pension schemes without incurring a tax charge. All pension benefits you build up use a percentage of your lifetime allowance. This includes pensions outside the NHS Pension Scheme (apart from the State Pension). The lifetime allowance is currently £1,073,100.  The lifetime allowance charge is a form of tax for which both you and the scheme administrator are jointly liable. The rate of tax charged will depend on whether you take any benefits that exceed the lifetime allowance as a pension or a lump sum.

The lifetime allowance charge is:

55% if you are taking the excess as a lump sum

25% of the capital value where you take it as a taxable pension income

NHS Pensions pays your lifetime allowance charge to His Majesty’s Revenue and Customs (HMRC). It recovers the cost by permanently reducing your NHS pension benefits. The calculation used for the recovery charge from your pension reflects life expectancy. 

What factors offer protection from the lifetime allowance charge?

As per the (HMRC), you must inform the pension scheme administrator before a benefit crystallisation event (BCE) where you intend to rely on an enhanced lifetime allowance in order to eliminate or reduce liability to a lifetime allowance charge.

In most cases where you are entitled to an enhancement factor, you are likely to be entitled to just one factor. However, if you are entitled to more than one enhancement factor, all the relevant factors are aggregated and applied as a single lifetime allowance enhancement factor at any BCE.

What are some examples of factors that might affect my lifetime allowance?

-While living abroad, you contributed to some of your pension benefits and did not receive tax relief on those contributions in the U.K.

-While working in another state, some of your pension benefits have been transferred in from another pension you received abroad and one from which you did not receive U.K. tax relief on your contributions.

-Some of your pension benefits are from a pension credit and the funds had already been tested against your ex-spouse’s lifetime allowance (e.g., you received them as part of a divorce settlement).

-Some of your pension benefits are from a pension credit that was acquired before 6 April 2006.

How Could Working Abroad Affect my Lifetime Allowance?

According to, these are the primary guidelines to consider regarding your lifetime allowance while living abroad:

 -If you live or work in another country, you might be able to contribute towards that country’s State Pension scheme.

-If you’ve lived or worked in another country in the past, you might be eligible for that country’s state pension and a U.K. State Pension.

-Depending on where you’ve lived or worked, you may need to make more than one pension claim (e.g., you might be able to claim another country’s state pension).

-You only need to claim your state pension in the last country where you lived or worked. -Your claim will cover all European Economic Areas (EEAs), Gibraltar and Switzerland. -You do not need to claim for each country separately.

-For countries outside the EEA (except Switzerland), you need to claim your pension from each country separately.

-If you’ve lived or worked abroad, your U.K. State Pension will be based on your U.K. National Insurance record. You need 10 years of U.K. National Insurance contributions to be eligible for the new State Pension.

-You may be able to use time spent abroad to make up the 10 qualifying years. This is most likely if you’ve lived or worked in: the EEA, Switzerland, Gibraltar, and certain countries that have a social security agreement with the U.K.

What is an example scenario?

-Let’s say you have 7 qualifying years from the U.K. on your National Insurance record when you reach State Pension age.

-You worked in an EEA country for 16 years and paid contributions to that country’s state pension.

-You will meet the minimum qualifying years to get the new State Pension because of the time you worked overseas.

-Your new State Pension amount will only be based on the 7 years of National Insurance contributions you made in the U.K.

-You want to retire overseas—You can claim the new State Pension overseas in most countries.

– Expat residents of EEA, Gibraltar, Switzerland, and countries with a social security agreement with the U.K. will increase their pensions each year.

-Your new State Pension may be affected if your circumstances change.

*Additional information and more specific details can be found at the International Pension Centre


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 accept 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.


Chris Lean

Chris is a Chartered Financial Planner who writes blogs and articles to simplify and explain some of the financial issues that affect UK expats. Subjects include; hot topics, regulation and the ever-changing world of finance.

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