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The prospect of working abroad is an interesting one and an opportunity that many of us would jump at. But with Brexit, Covid and the rapid growth of remote working, it is not something that is without its difficulties.
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Whether you are working abroad or retiring to a different country, emigrating is something that can pose a number of issues to you and your pension. There are a number of considerations to make ahead of your move: how can I claim my pension in a different country? What taxes will I have to pay? Will exchange rates impact the amount?Here we explore these topics in more detail and take a look at what options you may have when you choose to move abroad.
Types of pensions
Before you work out what you can and can’t do with your pension, it is important to understand the different types of pension you may have.
Private Pension
A private pension is set up in order for you to save money ahead of retiring. More often than not, they are ‘defined contribution schemes’, meaning they are based on the contributions made by you and sometimes your employer, as well as the performance of any investments you may have.There is also ‘defined benefit schemes’ which are not based on how much you put in but rather your salary and how long you worked for your employer.
State Pension
The State Pension is a government payment that you can claim when you reach the State Pension age. Currently, this is 66 years old however it is expected to rise in the coming years. Visit the Government’s official State Pension Age calculator to work out at what age you are able to claim this.The amount received is not fixed and is dependent on your National Insurance record.
Contributing To Your Pension Abroad
Until recently, paying into a UK pension scheme from abroad was not as simple as it is today. Right now, though, there are no limits to the amount you pay into a UK pension from abroad. There is, however, the caveat that any tax relief you would benefit from in the UK is now no longer available to you.The rules and conditions of UK pensions can be different depending on the provider so consulting a financial advisor or your pension manager is vital. They will be able to advise you on how the best way to continue is. Some may suggest transferring to QROPS (Qualified Recognised Overseas Pension Scheme - these are pension schemes that officially meet all of the requisite criteria set out by HMRC) if emigrating is a long term or permanent situation, while others may recommend leaving the pension untouched and allowing your investments to improve if they are only working abroad for a year. As always, check with your pensions manager before making any decisions.
State Pension And Emigration
As we mentioned above, the State Pension is a regular income that you can receive when you reach the State Pension age (currently 66 for both men and women). As it is paid by the British government, you would be forgiven for thinking that you cannot claim it if you live abroad.You can, however, claim the State Pension if you live abroad provided you are of the right age and have paid enough National Insurance contributions - this can be checked on the Gov website.
Claiming Your Pension Abroad
If you decide to leave your pension in the UK when you emigrate, you will still have several options at your disposal:
Not touching the pension until you need to, letting it grow further.
Annuity - consider this a “life salary”, giving you a guaranteed income for the rest of your life
An adjustable income which works similarly to the annuity but you have control over how much you receive and when
Claiming your entire pension in one go. 25% of this is tax free but you have to pay income tax on the remainder.
Claiming your entire pension in chunks - similar to doing it one go but the 25% is spread out over time, not on a one-off payment.
If your pension is more sizable, you may have the option of combining any of these.The thing to remember with UK pension managers is that they will very rarely pay your pension into an account that is overseas and if they do, you may end up having to pay the fees included. In this situation, it is recommended to have the money paid into a UK account which is then managed by yourself.
Pensions and taxes
As your pension is typically viewed as an income, any payments you receive may be taxable. Depending on the country, however, you could end up paying significantly more or even significantly less tax than you would if you were in the UK. If you live abroad (or spend fewer than 16 days a year in the UK) you are considered a non-UK resident and therefore you are unlikely to have to pay any taxes on your State Pension. On your private pensions, however, this might be different.Depending on the country you have emigrated to, you may be liable to pay their taxes on your pension, as well as other UK taxes on it due to it being considered a UK income.There are some countries that have a double-taxation agreement with the UK which means you would not have to pay double the tax you normally would.
Australia
Belgium
Canada
Denmark
Germany
Hong Kong
UAE
There are over 100 countries that have this agreement - the entire list can be found on the Gov website.It is worth noting that even though there is still a great deal of uncertainty around Brexit and the impact it will have on trade and country relations, the double taxation treaty was not agreed by the European Union or the European Economic Community but by the two countries involved and will therefore not be impacted by Brexit.
How Can Spring Help
Our We Buy Any House service means that if you are planning to emigrate for whatever reason and need to get things over the line quickly, you can. Our dedicated team of property specialists are able to guide you through each step of the home-selling process and can help you achieve your goal in as little as seven days or whatever your emigration timeline is.We have a wealth of experience in assisting many customers who have made the decision to sell their home and retire abroad. For more information on our We Buy Any House service, visit our guide section here. And for a better understanding of how to sell your house fast with Spring, you can click here.You can also contact us and start your process today. If you would like to speak to one of our Property Advisors about the sale of your home before you emigrate, call us at 020 8629 7877 or email us at [email protected].
About Spring
Cormac Henderson, the visionary founder and CEO of Spring, has the ambition to revolutionise the way people sell their home and this means building a customer-focused, process driven organisation that collaborates with its partners, adding value to their business and customer experience. Now a recognised leader in the property sector, Cormac has given his voice to industry publications to discuss the problems inherent in the traditional housing market and has been an outspoken contributor examining the lessons the retired communities sector must learn from the Covid-19 pandemic.
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