What happens to your pension if you move or retire abroad?
Thousands of people leave the UK every year, many to enjoy their retirement in another country, seeking lower taxes, sun and often more affordable adventure. We look at what happens to your pension if you move or retire abroad.
Laura Miller
Whether it’s France, Spain or Greece, or a more far-flung destination like Canada or Australia, becoming a UK expat can mark the start of an exciting chapter, with some deciding to make the move after leaving the workforce.
But while retiring abroad sounds great, what would happen to your pension savings? And do you still get the UK state pension if you retire abroad?
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Dean Butler, managing director for retail direct at Standard Life, said: “After a summer holiday, it’s not uncommon to return home wondering what life would be like if you’d stayed forever. For some, this turns into a real plan of moving abroad permanently and thanks to the rise of remote work and the emergence of the ‘digital nomad’, it’s becoming a more realistic option at every stage of adult life.
“Whether you’re planning on moving abroad to retire, or WFB (working from beach) is on your horizon, it’s important not to lose sight of your hard-earned pension.”
What happens to my UK pension pots when I move abroad?
When you move to a different country, any pension plans you have in the UK won’t follow you unless you arrange for them to be transferred overseas.
“Instead, they’ll stay where they are, meaning once you reach 55 (57 from 6 April 2028) you can start taking money from them, even while you’re overseas,” explained Butler.
Can I transfer my pensions to the country I’ve moved to?
You can usually transfer your UK pension plan(s) to a different pension scheme abroad, according to Butler, but you’ll need to make sure you’re transferring into a “Qualifying Recognised Overseas Pension Scheme”, or QROPS for short.
This is essentially a pension scheme that follows similar rules to UK schemes – there’s a list on gov.uk.
“You may be able to make this transfer tax-free, or otherwise you might need to pay 25% tax on the amount you’re transferring out of the UK – it depends on your individual circumstances, including where you live when you make that transfer,” said Butler.
There is also an “overseas transfer allowance”, which is a cap on the amount of pension savings you can transfer out of the UK.
Unless you have protection in place, the overseas transfer allowance is usually £1,073,100. If you move any more than this you’ll normally need to pay a 25% tax charge on the excess.
“If you try to transfer your UK plans to a scheme that isn’t a QROPS, you could face a 55% tax charge and even extra penalties on top of that. This is because it could be seen as making an unauthorised payment from your plan. Transferring to a scheme that isn’t a QROPS also probably won’t be regulated, and you might not be able to get any compensation if there’s any issue with the scheme in the future,” said Butler.
Moving a pension plan overseas is a big decision, and it won’t be right for everyone. It’s wise to get financial advice to consider the pros and cons properly before you make the leap. Pensioners moving abroad are a target for scams, so be wary of offshore financial advisers. Meanwhile, some offshore financial advisers are really just salespeople driven by the large commissions on offers from QROPS transfers, which can leave a big dent in your pension.
In relation to self-invested personal pensions (SIPPs), the underlying investment strategy should be reviewed with a qualified adviser to ensure it will continue to meet your needs, especially where income will potentially need to be drawn down in a foreign currency.
For workplace pensions, check with the pension administrators or trustees whether moving overseas will have any impact on the timing or flexibility of accessing pension benefits.
When you do not have to pay tax on a transfer to a QROPS
You usually do not pay tax if you transfer to a QROPS provided by your employer. Check with the scheme to find out.
You do not have to pay tax on a transfer to a QROPs if you live in the country your QROPS is based in and the transfer does not exceed your available overseas transfer allowance.
You also do not have to pay tax when you transfer to a QROPS based in the EU, Norway, Iceland, Liechtenstein or Gibraltar if all the following are true:
- you live in the UK, the EU, Norway, Iceland, Liechtenstein or Gibraltar
- you requested the transfer before 30 October 2024 and it’s completed before 30 April 2025
- the transfer does not exceed your overseas transfer allowance
If you move countries within five years of the transfer you should fill in form APSS 241 and give it to your scheme administrator.
You’ll get a refund if you’ve moved to the country your QROPS is based in or have to pay 25% tax on your transfer if you’ve moved away from the country your QROPS is based in.
Can I keep paying into a UK pension if I live overseas?
You should check this with your provider as it depends on the rules of your pension scheme. Butler warns that you may not be eligible to get any tax relief on the payments you make into the UK pension, or the amount you do get might be limited.
Whether you get pension tax relief and how much you get depends on your circumstances. For example, you can still get tax relief if, in that particular tax year, you have “relevant UK earnings” that could be taxable in the UK.
This includes things like income from employment, including salary and overtime. The government website MoneyHelper gives some more examples.
What happens to my state pension if I move overseas?
You can still claim your UK state pension abroad as long as you’ve paid enough National Insurance (NI) contributions to qualify.
This means 35 years of National Insurance contributions to get the full new state pension, and at least 10 years to be entitled to a reduced payment. However, you must notify the Department of Work and Pensions of your move.
It's worth being aware that the state pension triple lock only applies in certain countries. These are currently any country in the European Economic Area (EEA) and Switzerland, as well as any country that has a social security agreement with the UK allowing it to pay state pension increases.
This includes Jamaica and the USA. Here’s a full list of the countries where you get an annual increase to your state pension.
If you’re emigrating to Canada or Australia, or a host of other countries like Thailand, India and South Africa, your state pension will not increase.
This is something to bear in mind, as over a 20 or even 30-year retirement, this could mean you lose out on thousands of pounds due to your state pension being frozen.
How much state pension could I miss out on if I move overseas?
British pensioners planning to retire overseas in the 2026/27 tax year could forgo more than £77,000 in state pension income over 20 years if they move to a country where payments are frozen, according to analysis from Rathbones, a wealth and asset manager. A loss of £77,585 over 20 years is equivalent to around £3,880 a year, or £320 a month over 20 years, that retirees would need to generate from other sources.
This assumes a full new flat-rate state pension totalling £12,547.60 from April 2026, uprated by 2.5% per year (in line with the lowest possible increase under the triple lock). The loss of income could be even greater if inflation or average earnings growth exceeds the 2.5% minimum guaranteed under the triple lock.
The UK’s triple lock ensures the state pension rises each year by the highest of inflation, average earnings growth or 2.5%. However, for retirees who move abroad to certain countries, state pension payments are frozen at the rate first received, with no future increases.
Olly Cheng, a financial planning divisional lead at Rathbones, said: “We often speak to people hoping to retire overseas, many of whom don’t realise that this decision could significantly affect their state pension entitlement.
“Over time, inflation steadily eats away at its value, meaning your state pension buys less each year in real terms. What looks like a modest shortfall at first can quickly snowball into tens of thousands of pounds in lost income over retirement, and once your pension is frozen, there’s very little you can do to undo the damage.”
Even over shorter periods, the impact is significant. After just 10 years abroad, retirees could be more than £18,600 worse off, rising to over £42,000 after 15 years.
Cheng from Rathbones added: “Anyone planning to retire abroad should start by checking their National Insurance record to make sure they’re entitled to the maximum state pension, particularly if future increases won’t apply.
“It’s also vital to understand how much private income you’ll need to replace any lost state pension, as well as factoring in local tax rules, healthcare costs and currency movements, all of which can materially affect how far your money stretches overseas.
“Given the complexity and the irreversible nature of some decisions, taking professional financial advice before committing to a move can help avoid costly mistakes later on.”
According to the All-Party Parliamentary Group on Frozen British Pensions, 450,000 British pensioners – half the pensioners living overseas – do not benefit from state pension up-rating.
How can I take money out of my UK pension pot if I retire overseas?
If you’re abroad, you’ll generally be able to take your money in the same ways as you would in the UK. However, some providers may limit payment options.
Butler advised: “For added clarity, contact your existing provider regarding the payment options available, and then if your existing plan doesn’t offer what you want, shop around.
“However, your options may be still limited as some providers won’t let you open a new plan if you live abroad.”
Can the money I withdraw from my pension be paid into a foreign bank account?
Some pension providers may be willing to pay into an overseas bank account, although they may charge extra for this. Others might only pay into a UK account.
Be aware that the exchange rate will affect how much you get when your pension money is changed into your local currency.
How will I be taxed on my UK pensions when I live abroad?
This is where it can get complicated. If you take money from a UK pension scheme, you might need to pay UK income tax on it, as it counts as UK income, but the country you’re living in might also tax you.
“The UK has a ‘double-taxation agreement’ with numerous countries, which means you may either be able to get tax relief or a refund, so you won’t end up paying tax on your pension savings twice. You can find out more about tax on your UK income when you live abroad on gov.uk,” said Butler.
Whether it is possible to cease payment of UK tax on a pension will depend on whether there is this double taxation agreement (DTA) with the country of residence and if so, what the pensions article in the agreement says. Many DTAs will tax the pension only in the country of residence but even in that case the mechanism for claiming the tax relief can vary. Where a pension can be exempted from UK tax, a No Tax “NT” code can be issued by HMRC to prevent PAYE from being deducted at source.
Butler added: “In the UK, you can normally take up to 25% of your pension tax-free (with the total amount you can normally take tax-free across all your pension plans being £268,275). However, you might not be able to take money tax-free in the country you’ve moved to, and it may be taxed as income, so it’s important to investigate how this works in the overseas country.”
How will I be taxed on other forms of income when I move abroad?
It’s important to understand the tax implications of moving abroad, in terms of your ongoing UK tax position and the requirements in the country you’re moving to.
Rachel Sestini, managing director of tax consultancy Sestini and Co, explains: “From a UK tax perspective, to have a significant impact and reduction in their ongoing tax liabilities, an individual needs to become non-resident for tax purposes, which is not as simple as spending less than half the year in the UK. Becoming resident in another country also does not mean you are automatically non-resident for tax purposes in the UK.”
The statutory residence test looks at ongoing ties to the UK as well as the number of days spent here, to determine an individual’s residence status. Sestini adds: “There are provisions that make it easier to become non-resident for people going overseas to work full-time, however, these typically don’t apply to older or retired individuals.
“The statutory residence test is applied individually to each person moving abroad and it is possible a couple may have differing residence statuses if their travel patterns and/or connections with the UK are not identical.”
Someone who becomes a non-UK resident will generally be taxed only on UK sources of income and not on income arising overseas. However, there are certain types of income and capital gains that will continue to be taxed in the UK even to a non-UK resident, in particular:
- UK pensions
- Capital gains (if non-resident for fewer than five tax years)
- Dividends in a personal company (if non-resident for fewer than five tax years)
In relation to the destination country, tax systems vary widely, and can change significantly over time so it’s essential to take advice before committing to a move on how your various sources of income as well as assets may be taxed.
According to Sestini, other countries may impose taxes on income or gains that are tax-free in the UK, such as the sale of a home or an ISA.
There may also be taxes that we don’t see in the UK, such as wealth taxes, state taxes, and even church taxes, as well as a range of municipal and social taxes.
Expats may need to continue to submit UK self-assessment tax returns after they have left the UK, for example, if they have retained property in the UK that is rented out, or if they have a UK pension. Non-residents can't use the HMRC online self-assessment process to complete their tax returns. The options are a paper return which has a deadline of 31 October, or to pay for commercial tax filing software, which extends the deadline to 31 January.
“The self-assessment returns from the year of departure need to include the residence and remittance pages, which report the ongoing connections with the UK as well as the number of days and visits to the UK during the tax year. It is therefore really important to keep track of flights and other travel into and out of the UK,” says Sestini.
Those leaving the country can formally notify HMRC of their departure using form P85. Individuals with UK property that is rented out (whether a former main home or investment property) should use form NRL1.
Will my loved ones have to pay inheritance tax if I die abroad?
Something to consider is how your overseas pension (and any other assets) may be potentially liable to UK inheritance tax (IHT).
Until the 2024 Autumn Budget, IHT was based on a person’s domicile status. From 6 April 2025, however, the domicile rules were replaced by new long-term UK resident rules.
Alex Gaita, financial planning director at Schroders Personal Wealth, said: “To be deemed a UK resident, you must have either lived in the UK for 10 consecutive years, or, a total of 10 years or more within the previous 20 years.
“For people who are considered a UK resident when they die, IHT will apply to their worldwide assets which includes their pension from April 2027 – even if it is transferred out of the UK,” he added.
So, in the case of those leaving the UK, their IHT position will depend on how much time is spent outside of the UK when they die.
“If you have successfully become a non-UK resident, your overseas pension (plus any other overseas assets) will no longer be liable to UK IHT. It is worth noting that UK IHT still applies to any UK based assets held by non-UK residents,” said Gaita.
You should also understand the tax rules in your new country, as they may have their own version of IHT which must also be considered.
