If you move overseas but still have pensions in the UK, you’ll need to consider how you will access those savings in retirement.
Your UK pensions will typically pay an income in sterling, but if you’re living overseas, you’ll need to convert the funds into a local currency. In some cases, this could make it harder to access your pension savings.
Exchange rate fluctuations could also affect the amount of income you receive.
That’s why it’s crucial to understand how exchange rates affect your UK pension abroad and why moving your savings into a self-invested personal pension (SIPP) could help.
Read on to learn more.
Some pension providers may not pay into an account outside the UK
Before you consider how exchange rates affect you, it’s important to understand how a UK pension provider will pay income if you live overseas.
This depends on the specific provider, as some will only pay into a UK account. As a result, you will need to move the funds into an account in your country of residence and convert them to a local currency.
This creates additional admin, and you may have to pay international transfer and currency exchange fees each time you move your money.
Some pension providers are willing to pay into an account abroad, meaning you could avoid certain charges. However, they might levy an additional fee themselves, meaning you could still lose a portion of your income.
Also, in both circumstances described above, exchange rates could significantly affect the value of your income when you convert it into a different currency.
Currency risk could deplete the value of your retirement savings when drawing your pension abroad
Currency risk describes the potential for financial loss when exchange rates fluctuate. This could happen when drawing a UK pension abroad.
For instance, if you paid into a UK pension during your working life and then moved to Spain when you retired, you would have pension savings in sterling, but your expenses would now be in euros.
As such, you would need to convert any income you draw from your UK pension to euros. The amount you receive depends on the current exchange rate when you make the transaction.
According to Wise, if you had converted £2,000 into euros on 29 August 2025, you would have received €2,313.34.
In comparison, if you had made the same transaction a few months later on 29 October 2025, you would have ended up with €2,278.04. Bear in mind that these figures show the mid-market rate and don’t necessarily include the provider’s spread or transfer fee, so you would likely receive even less.
This means your £2,000 pension withdrawal may buy less in October than it would have done in August – it’s value can vary from month to month.
Consequently, if you want to maintain the same income in euros, you would likely have to make larger withdrawals in months when exchange rates were less favourable. This could mean you deplete your pension pot faster than planned.
While the figures above show a relatively small difference in your income, these losses can add up over the course of your retirement. The effect of currency risk is also much greater when drawing and converting large lump sums.
You are at the mercy of exchange rates in this way when accessing a UK pension abroad. In times of economic turmoil, a weak pound could seriously disrupt your retirement income.
Transferring your UK pensions into a SIPP could help you mitigate currency risk
Our SIPP allows you to manage and access your pension savings easily from outside the UK. Crucially, it may allow you to shield yourself from exchange rate fluctuations and expensive fees.
If you transfer your UK pension into our SIPP, you can receive payments into a foreign bank account in many different currencies. This means you could avoid charges for exchanging currency or making international transfers.
Additionally, you can hold your savings in multiple currencies. This allows you to track exchange rates and make strategic withdrawals from your pension.
For instance, if you held some savings in sterling and some in euros, you might withdraw euros to cover your living expenses in months when the pound was weak. Then, if exchange rates fluctuated and the pound was very strong, you could convert a large sum and benefit from the favourable rates.
This flexibility can help you maximise your pension income and maintain a better quality of life in retirement.
Get in touch
If you are concerned about currency risk when living abroad, you may benefit from using a SIPP.
You can email us at [email protected] or call 03303 202091 for more information.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.
