Tax and Your Pension As An Expat | ExpatWoman.com
 

Tax and Your Pension As An Expat

Making the most of your pension as an expat is something you should investigate.

Posted on

28 February 2016

Last updated on 14 May 2018
Tax and Your Pension As An Expat

Making the most of your pension as an expat is something you should investigate because where and when you go can make a huge difference in the cash you receive after tax.

Although British pensions pay a tax-free lump sum, depending on where you settle, this could be taxed in the country where you decide to settle as a tax resident.
 
Some countries have tax regimes that are much more favorable than others, so this is a decision to make before you decide to become an expat.
 
Is drawing down a 25% tax-free lump sum in the UK a better tax option than taking the same money overseas?

Paying less tax on pensions

Taking a 25% tax-free lump sum in the UK and paying tax at 20%, 40% or 45% bandings on the balance can work out expensive.
 
In France, pension lump sum drawings are taxed at 14.9% – with half going to social charges that can be avoided by filing the right forms. However, if an expat delays taking the lump sum until they are tax resident, the whole pot can be taken as a single lump sum with an overall tax rate of 7.5% applied to all the money.
 
Taking the 25% lump sum in the UK and then becoming tax resident in the United Arab Emirates to draw the rest of the fund can see no tax charged on retirement savings.
 
Another expat strategy is to transfer their pension to a Qualifying Recognized Overseas Pension Scheme (QROPS), Self-Invested Personal Pension (SIPP) or Qualifying Non-UK Pension Scheme (QNUPS)

When to take pension tax advice

In a country where tax is paid on pension income, the tax-free lump sum is extended, reducing the tax on the balance of the fund.
 
The vital point is looking at tax and pension finances before departing the UK. 
 
Once an expat becomes tax resident in another country, arranging their financial affairs in the most tax-effective way is vital. 

Can I make a pension transfer when I move abroad?

When moving abroad a common question asked by Expats is what will happen to my pension? There are three main options to enable a pension transfer:
  • SIPP – Self-Invested Personal Pensions
  • QROPS – Qualifying Recognized Overseas Pension Schemes
  • QNUPS – Qualifying Non-UK Pension Schemes
How Globaleye Can Help You:
  • Knowing all the pension options open to you
  • The key benefits the various schemes (QROPS, SIPP etc.)
  • The tax implications you need to be aware of.
Download our guide on pensions today here.

 
 

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