What happens to your pension when you leave the UK – UK pension refund

Thousands of people leave the UK each year to start a new job overseas or retire to sunnier climates. Perhaps you may be moving back to your home country after a stint working in the UK.

If you’ve been working for an employer in the UK then you will have been automatically enrolled into the company pension scheme which is now a legal requirement for all UK employers.

You and your employer will have been contributing a minimum of 8% of your salary into your pension fund which can add up to a sizeable sum that you don’t want to miss out on when you leave.

When the time comes to leave the UK, you should decide what you want to do with the money that you have built up in your pension, as the minimum age that you can withdraw money from a UK pension is age 55 and this is scheduled to rise to age 57 in 2028.

So, what options do you have:

  1. Leave your pension as it is
  2. Transfer your pension to a different pension plan in the UK
  3. Transfer your pension to an overseas pension scheme

1. Leave your pension as it is

You can leave your pension as it is with the same pension provider, you’re not able to collect a refund of your contributions and the same goes for your employer.  The money will remain invested in the pension scheme and therefore the value will fluctuate in line with movements in the financial markets.

Most company pension schemes are very basic and don’t provide much control or flexibility to be able to tailor your pension to your circumstances. You are also normally restricted to a very basic range of investments which are managed by the pension provider.

Your pension will still be subject to the pension provider’s ongoing annual management charges which normally range between 0.75% and 1.5% per year for typical company pension plans.

Your pension scheme will generally require that you fill in a form whenever you want to make any changes, whilst sending your annual statement through the post, which is not really practical for anyone living overseas.

2. Transfer your pension to a different pension plan in the UK

Everyone has the statutory right to transfer their pension to another UK registered pension scheme. You may want to consider transferring your pension to a SIPP (self invested personal pension) which can provide you with much greater control and flexibility over your pension and is not linked to any employer.

MyExpatSIPP provide an online SIPP account that is designed for people who have now left the UK and want an easy way to stay in control of their pension with minimal paperwork and fuss.

You can invest in a wide range of investments including Funds, ETFs, Investment Trusts and direct Stocks in multiple currencies. Alternatively, you can choose from our range of ready-made investments which use low cost funds managed by Vanguard and BlackRock.

When you reach age 55 and want to make withdrawals from your pension, unlike most UK pension schemes, withdrawals from the SIPP can be paid into a local, non-UK, bank account.

Our expert Account Managers are there to support you and have years of experience with helping people access their UK pensions and can guide your through the process of drawing your UK pension from overseas whilst using the UK’s double taxation agreements to minimise the tax you’ll pay.

3. Transfer your pension to an overseas pension scheme

It is possible to transfer your pension to a pension scheme in another country. However, the receiving pension scheme must meet a certain set of criteria, as per HMRC regulations, in order to avoid paying a large tax charge of up to 55%. The receiving scheme must be a QROPS (qualifying recognised overseas pension scheme).

Even if the initial transfer does not trigger any tax charges, if you change your circumstances with five years of the transfer, such as moving country again, HMRC can retrospectively tax the transfer at 25% and request the payment from your pension scheme.

If you’re leaving the UK and have money in a UK pension plan, speak to us about transferring your pension to a SIPP for an easy way to stay in control of your pension.

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