We all know we need to be planning shrewdly for our retirement, especially as in this
day and age we’re fortunate enough to be expected to live longer than in previous
generations, so our retirement funds will need to stretch further. The issue becomes
even more complex for non-UK residents. We’ve explored some of the key questions you
might have below.
Am I still eligible for the State Pension if I live abroad?
Even if you live abroad it is possible to still claim the State Pension as a regular payment
and you can still have other income, like a personal pension or a workplace pension. If
you reached the state pension age on or after 6 April 2016 and are eligible, depending
on your National Insurance Contribution record, you will receive the new State Pension.
If you reached pension age before then, the old rules will apply. One difference if you
move abroad permanently is that pension credit, a benefit to top up your weekly
income, stops completely.
Will I pay tax on my State Pension?
Non-residents don’t usually pay UK tax on the State Pension. You may have to pay UK
tax on your State Pension if you live abroad but are classed as a UK resident for tax
purposes. The country where you live might also tax you on your UK income. However, if
it has a ‘double-taxation agreement’ with the UK, you can claim tax relief in the UK to
avoid being taxed twice.
Will my State Pension still increase? In any country?
If you live in the UK, your State Pension usually rises each year. But if you move
overseas, you’re only entitled to an annual increase if you live in the European Economic
Area (EEA). This includes the 28 countries who are members of the EU plus Iceland,
Liechtenstein and Norway. It also applies to Gibraltar and Switzerland. Although
Switzerland is neither an EU nor EEA member, it is part of the single market so the same
conditions stand. It also applies in countries that have a social security agreement with
the UK (although you can’t get an increase in Canada or New Zealand). There has been
no immediate change to the rights and status of EU nationals in the UK, and UK
nationals in the EU, as a result of the referendum. but this position may alter when
Brexit negotiations are eventually completed. Should you decide to return to live in the
UK, your pension will increase to the current rate.
Why is it important to keep topping up my National Insurance contributions?
Your National Insurance record is used to calculate your new State Pension and you’ll
usually need ten qualifying years to get any new State Pension. The amount of pension
you get can be higher or lower depending on your National Insurance record, only being
higher if you have over a certain amount of Additional State Pension.
If you’ve lived abroad for any length of time, you may well have gaps in your record,
which it is important to try and fill by paying voluntary National Insurance contributions.
These will go to your State Pension and certain benefits and allowances if you return to
the UK. You might still be able to pay UK National Insurance while you’re working
abroad, depending on where you’re working and how long for.
The whole area is quite complex so please do get in touch if there are any aspects
relating to your own particular position you would like to check.