UK Pensions Abroad – What You Need to Know
Are you planning to retire overseas or are you already packing your bags?
Understanding how UK pensions abroad function when you’re living overseas is essential for a smooth transition. Whether you’re eyeing a villa in Spain or a quiet spot in Canada, your State Pension, workplace schemes, and private plans don’t vanish, but the rules shift once you leave the UK.
Let’s explore what changes, what stays the same, and how to prepare for retirement beyond British borders.
The State Pension Overseas
The good news? You can claim your UK State Pension abroad from anywhere in the world, as long as you’ve earned it through National Insurance (NI) contributions. In April 2025, the full State Pension pays £221.20 per week, requiring 35 qualifying years of NI. At least 10 years gets you a partial amount; fewer, and you’ll draw a blank. To set it up, contact the International Pension Centre before you move payments can go to a UK account or, in many cases, one in your new country.
Here’s the twist: whether your pension goes up each year depends on where you settle. Back home, the UK bumps up the State Pension annually with something you’ve likely heard called the “triple lock”. it rises by whichever’s highest: inflation, wage growth, or 2.5%. If you’re in the European Economic Area (EEA), Switzerland, or a place with a social security deal like the USA, Australia, or Japan, you’ll get those increases too. Move to Canada, New Zealand, or South Africa, though, and it’s a different story: your pension stays stuck at whatever it was when you left. Over the years, that can pinch as prices climb. Check where your new home stands on the GOV.UK State Pension abroad page.
Workplace and Private Pensions Abroad
Your UK workplace and private pensions don’t disappear when you move, they stay rooted in the UK unless you take action. You can access them from age 55 (rising to 57 by 2028), just as you would at home. Options include a 25% tax-free lump sum, flexi-access drawdown for gradual withdrawals, or an annuity for a fixed income. Most providers can send payments overseas, though some slap on fees or insist on a UK bank account, ring them up well in advance to confirm.
Fancy shifting your pension closer to your new life?
A Qualifying Recognised Overseas Pension Scheme (QROPS) lets you transfer workplace or private pots to a scheme in your adopted country, often in local currency to sidestep exchange rate woes. It’s tempting, but not without risks you might lose UK tax perks, and transfers over £30,000 legally require financial advice. The Pension Wise service offers free guidance to weigh the pros and cons. Without advice, you could face a 40% tax hit from HMRC, so tread carefully.
Tax Implications
Taxes get trickier abroad:
- UK Tax: Your pensions count as “UK-sourced income,” so anything over the personal allowance (£12,570 in 2025) might be taxed by HMRC. The State Pension’s taxable if your total income exceeds that, and workplace/private withdrawals (beyond the 25% lump sum) face income tax too.
- Local Tax: Your new country might tax your pensions as well, but double taxation agreements, listed on GOV.UK’s tax page, often ensure you’re not hit twice. For example, the UK-Spain treaty lets Spain tax your State Pension, with the UK stepping back.
Get the details for your destination, as rules vary widely. A local tax adviser can save you headaches.
Currency Considerations
If your pension is paid in pounds but you’re spending euros, dollars, or rand, exchange rates can make or break your budget. A strong pound boosts your cash; a weak one shrinks it. Services like Wise (or check out our referral benefit) offer low-fee transfers to convert pounds efficiently, handy if your provider won’t pay directly in local currency. Some expats open multi-currency accounts to hedge their bets, worth a look if you’re in a volatile market.
A Practical Example
Meet David, 67, relocating to Portugal. He’s got 35 NI years, so his full State Pension (£221.20 weekly) starts now, with annual increases intact thanks to the EEA. His £80,000 workplace pension lets him take £20,000 tax-free, with the rest in drawdown sent to his Portuguese bank. Portugal taxes it under the UK-Portugal treaty, avoiding double taxation. He uses Wise to convert pounds to euros cheaply, netting about €1,400 monthly after tax. With planning, it’s a workable setup.
Key Steps to Take
- Check Your State Pension: Use GOV.UK to forecast your entitlement and see if it’ll rise or freeze.
- Contact Providers: Ask about overseas payments, fees, and transfer options like QROPS.
- Research Local Rules: Will you pay tax twice? Is your pension recognized? Dig into your country’s laws.
- Plan Currency: Test tools like Wise or talk to your bank about exchange rate strategies.
Where to Find More Help
- GOV.UK State Pension Abroad: Full list of freeze zones and claim details.
- MoneyHelper: Impartial advice for expats.
- Your Pension Provider: Call them, specifics like fees or forms start here.
Why It’s Worth Sorting Now
Living abroad with UK pensions is absolutely doable, but it hinges on preparation. Will your income stretch in a new currency? Will it grow or stagnate? Getting these answers early keeps your retirement planning on track, wherever you plant your flag. Got a question about your move? Leave it in the comments, I’d be glad to assist!
If you liked this article, you might also like this article we wrote about retirement locations that still allow you to utilise your ISA for low to zero rates
