Payment of pension overseas

What is classed as overseas?

Anything outside the United Kingdom of Great Britain and Northern Ireland (the United Kingdom (UK)) is classed as overseas.

The Channel Islands and Isle of Man, although Crown Dependencies, are not part of the UK. Neither is the Republic of Ireland.

Will an individual being overseas affect how they can take pension benefits?

If an individual is not living in the UK when they come to take pension benefits, their provider may have to limit what options are available to them under their plan. This is because most UK providers can’t sell new business to those individuals who are not living in the UK on a permanent basis so any pension benefits options offered must be a continuation of their existing plan.

The UK provider may also have restrictions on where benefits are paid for example, they may not be able to pay benefits into an overseas bank account.  

Can a beneficiary who is overseas be nominated on an expression of wishes?

They can be nominated, however, similar to the answer above, the options that may be available to the beneficiary may be limited. This can cause issues for example, where the member died pre age 75 and benefits will be measured against the lump sum and death benefit allowance (LSDBA) as the only option is a lump sum.

How will pension benefits be taxed if an individual is overseas?

How the benefits are taxed will depend on whether there is a double taxation agreement between the UK and the country the individual is living in and what it states. Double taxation agreements between the UK and another country are designed to avoid an individual being fully taxed twice – once in the UK and once in the country they live in. 

How Double Taxation Treaties affect non-UK residents with UK income provides a list of the countries with which the UK has a double taxation agreement and a summary of the agreement.

Although the overseas individual may not pay UK tax, initially, the provider may have to deduct tax at the emergency rate, so the individual will need to reclaim some or all of this tax from HMRC. The individual will have to contact HMRC to arrange for future payments to be made either without tax deducted, or with tax deducted at a reduced rate. See: Tax on your UK income if you live abroad. HMRC will then let the provider know the appropriate tax code to use. 

The individual may still be able to claim UK personal allowance even if there is no double taxation agreement with the country, they live in. Claim personal allowances and tax refunds if you live abroad (R43)