Contributions to registered schemes for overseas individuals

As long as the scheme rules allow, anyone can become or remain a member of a UK approved pension scheme, regardless of nationality and UK tax treatment. However, tax relief on member contributions will only be available to those who are 'relevant UK individuals'.
Who are relevant UK individuals?
  • chargeable to UK tax, or
  • resident in the UK, or
  • who were resident in the UK in one of the previous five tax years and, at the time they were resident, became members of a UK registered pension scheme, or
  • who are a Crown Servant, or a spouse of a Crown Servant and have earnings subject to UK tax.

What are relevant UK earnings?

  • employment income
  • self-employed income
  • income from patents
  • earnings from overseas crown employment

How much tax relief is available?

Relevant UK individuals, who have relevant UK earnings of £3,600 or more, can receive tax relief on contributions up to 100% of their earnings with a tax charge on any contributions above the annual allowance.

Relevant UK individuals who have either no relevant UK earnings or relevant UK earnings of £3,600 or less will receive tax relief on contributions up to £3,600 each tax year only. Non-relevant UK individuals who do not have relevant UK earnings will receive no tax relief on their contributions. The ability to contribute for non UK individuals will also depend on the pension provider allowing this.

What about employer contributions?

In theory, an employer can pay any amount for an employee regardless of their salary. Employers may receive 100% tax relief on the whole contribution but it will be up to the employer's local Inspector of Taxes whether or not the entire contribution will be relievable for tax purposes.

If the employer's contribution, together with all other contributions to money purchase schemes and the value of any benefits accrued in defined benefit schemes exceeds the annual allowance, the scheme member will be liable to a tax charge on the amount over and above the annual allowance.

How does this work in practice?

Example 1

Marius is a member of his employer's final salary scheme and has been working in Germany on secondment since 2012. He is currently paid £35,000 each year and is taxed in the UK. The maximum gross employee contributions eligible for tax relief is, therefore, £35,000.

Example 2

Didier is a member of a group personal pension plan and he's going to work in France for an overseas subsidiary of his current employer. For the first two years, Didier will still be paid by the UK company (£20,000 a year) and from the third year, he will be paid in Euros and taxed under the French tax system.

The maximum gross employee contributions eligible for tax relief is £20,000 each year for first two tax years, then £3,600 each year for the following three years. Eligibility for tax relief will then stop unless Didier becomes a 'relevant UK individual' again.

Resource

HMRC: PTM044100 - Contributions: tax relief for members: conditions

Note

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

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Last updated: 19 Feb 2019

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.