How has Brexit affected pensions for expats?

The UK formally left the European Union in January of 2020. For many expats, the move has resulted in some confusion regarding the future of their pension pots. So how has Brexit affected pensions for expats?

In order to make sure you get the most out of your savings and prepare yourself for a bright and financially secure future, it’s important to understand the impact Brexit could potentially have on your pension if you live and work abroad.

If you’re worried about your savings, it’s important to note that you aren’t alone. There are plenty of expats in similar situations all over the world, and there is guidance available should you need it.

This short guide should be able to grant you some insight into what exactly has or hasn’t changed in regard to your pension.

Private Pension Rules

It’s important to pay attention to your private pensions when living abroad, as there might be some benefits you can take advantage of, allowing you to maximise the value of your savings.

You won’t usually have to pay UK tax on your private pension if you live abroad, but you might have to pay local tax rates, so it’s worth looking into this before you start withdrawing your savings; the rules may differ depending on where you are in the world.

Currently, your private pension and your workplace pension can be paid out to you wherever you are in the world, but it’s worth checking with your provider to see if they’ll pay out to a foreign bank account.

If your investments do well you will still see increases in your pension pot. You sould also still be eligable for the benefits your pension plan promises, just as you would if you were still a UK resident.

Your pension will be affected by the exchange rate since it will be paid to you in pounds, so it’s extremely important to factor this in it could result in income shortfall later on down the line.

Your pension won’t pay out automatically once you’re eligible if you’re abroad; you’ll need to contact the International Pension Centre and make them aware of your situation.

State Pension Rules

Provided you have paid enough national insurance to qualify, you can still claim your UK state pension while living abroad.

If you live in the European Economic Area (EEA), the EU, or Switzerland, you will still be able to benefit from increases in the UK state pension. You can also get these increases if you’re in a country that has a social security agreement with the UK. You can find the full list of these countries on the government’s website here.

Your pension will be paid in the local currency, so it’s worth keeping an eye on the exchange rates.

If you live outside of these countries, your pension may be frozen at a fixed rate, meaning you won’t benefit from annual growth, known as the ‘annual uprating.’

Expat Pension Options

One of the more common options when it comes to expat pension management is to transfer a UK pension scheme to a Qualifying Recognised Overseas Pension Scheme (QROPS).

This essentially allows you to draw your pension from another country, potentially resulting in some great tax benefits.

It is imperative to get professional financial advice before doing this, as you’ll likely want to go for the option that best prepares your finances for the future.

You could also withdraw your entire pension and reinvest it abroad for greater tax efficiency, or you could utilise a drawdown pension that allows you to take money from your pension as and when you need it.

Where we Come In

At iSIPP, we help people all over the world secure their financial future. We believe in the immense value of pension consolidation, and if you already have a Qualifying Recognised Overseas Pension Scheme (QROPS) in your country of residence, we can accept transfers from the QROPS to the UK based iSIPP.

Once you are a member of iSIPP, we’ll make it easier for you to manage your savings from wherever you happen to be in the world via our online dedicated portal. We offer simple and transparent fees and complete control and accessibility when it comes to choosing where and how your pension savings are invested.

Conclusion

Pensions have remained largely unaffected by Brexit, but in many ways, the landscape is still uncertain. If you are British expat living in the EU it would be worth keeping up to speed with the latest legislation on pensions each year to ensure you are best maximising your savings.

Disclaimer 

The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.

This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.