Pension scheme members working or retiring abroad

It is not uncommon, especially in international legal practice for UK employees to go abroad or for foreign nationals employed in the UK to return home to work or retire.

Providing the staff member joined the Pension scheme whilst in the UK, it will be possible for them to continue paying into the Pension for up to 5 years from the date of leaving the UK.

During this period, Her Majesty’s Revenue and Customs will continue to make a contribution equating to 22% of the total amount received by the Insurance Company, (reducing to 20% after April 2008), even though it is likely that the Pension scheme member will no longer be a UK taxpayer. A contribution equating to the basic rate of tax is payable but no payment is made by the revenue for high rate tax.

The effective maximum that can be paid into a UK Personal Pension Plan whilst working abroad is £300 per month, which includes any contribution from the Revenue and Customs.

For those working abroad it is sometimes possible to transfer a UK Personal Pension Plan into another Pension based abroad, however this will require individual Revenue approval, which could take up to 2 years. The Revenue will only approve a transfer into a Pension scheme operated abroad if the rules of this scheme are no less stringent than those applicable to the UK, i.e. a maximum of 25% of the fund value being taken as a lump sum at retirement and a minimum retirement age for those retiring after 2010 of 55.

In the event of an individual retiring abroad, it is possible to have regular Pension payments paid into an overseas bank account, care needs to be taken to ensure that the insurance company paying the Pension is able to do this, most countries popular with UK citizens retiring abroad have a double taxation agreement with the UK, which ensures that any income payable is not taxed twice i.e. once when it leaves the UK and again when it enters the country of retirement.