If you’re considering retiring abroad, it’s important to research the effect this may have on your state pension. Although this can be a time-consuming process looking at your options and choosing the best steps for your financial future is simpler than you might think.
Take a look at some of the most common queries about entitlement and access to your state pension when you move abroad.
How will your pension be affected?
Most people of pension age will be able to claim a state pension if they decide to move abroad providing they have paid sufficient National Insurance contributions during their working life. Pension amounts currently go up at a rate decided by the UK government and if you retire to locations in the European Economic Area (EEA), Gibraltar, Switzerland and countries that have a social security agreement with the UK (except Canada and New Zealand) you will be entitled to the same rises.
Countries outside of this will not be eligible for yearly increases and at present, there will be no changes to this agreement whilst the UK remains in the EU. If you are unsure of your entitlement to a state pension, contact HMRC for a state pension statement.
Paying tax on your state pension
If you decide to retire abroad, you may have to pay tax on your pension amount. For tax purposes, you are classed as a UK resident and the amount taxed will be dependent on your overall income.
Claiming your state pension
Making a claim for your UK state pension is a relatively simple process. Firstly, you have to be within four months of retirement age and you are required to contact the International Pension Centre and fill in the necessary forms to access your state pension.
This process will determine a number of things including where you would like the funds paid and how often the money can be accessed. A UK state pension can be paid into a UK bank or building society account or a bank account in the country you reside in. The money can be paid into a personal or joint account and if you have permission, into someone else’s account. Your pension will be paid in the local currency so the amounts may differ depending on conversion rates at the time of payment.
Similar to the payment of the state pension in the UK, you will receive your money every 4 weeks. There is also the option to receive your payments every 13 weeks and for those that receive an amount of under £5 a week, this will only be paid once a year.
Changes in circumstances
It is important to ensure you inform the International Pension Centre of any changes in residency or circumstances that may affect your state pension eligibility. You may be asked to complete a ‘life certificate’, which will check your entitlement and any delays in sending this back may suspend further payments.
Returning to the UK
If you decide to return to the UK at any point, you will need to inform both the Pension Service and HMRC, providing details of your return date and contact information.