With offices in both the UK and Hong Kong, we’re used to having clients make the move from one to the other – either for a set period of time or a more permanent arrangement.
If you have taken the decision to relocate abroad, even if your ultimate intention is to return, you will clearly have a lot of financial arrangements to deal with as part of your move.
In my experience of helping clients who have made the same transition, one key subject that you may overlook is your UK-based pension arrangements.
To help you ensure you have thought of everything, discover five important pension steps you should consider before your move.
1. Review your existing pension arrangements
It always helps to check the current value of your pension holdings as this can help inform your future financial planning. This is especially important if you plan to return to the UK at some stage in the future.
Because pensions are a highly tax-efficient way to save money for your financial future, you should also consider maximising your contributions during the tax year that you’re leaving the UK.
You can get tax relief on your contributions up to the lower of £60,000 or 100% of your earnings. However, if you have unused Annual Allowance from previous tax years, you could potentially carry-forward unused allowances from the previous 3 tax years, meaning the maximum tax relievable contributions in the current year could be as high as £180,000.
2. Set up a pension if you don’t have one
If you don’t currently have a UK pension of any type, it might be worth setting one up and make a small payment into it, even if you do not intend to make any further significant contributions.
As described above, as well as using your Annual Allowance in the current tax year (£60,000), you can also carry forward unused contributions from three previous tax years, when the Annual Allowance was set at £40,000. Upon return to the UK in the future, you will be able to benefit from this carry forward so long as you had a UK pension during the years in which you are carrying forward from, even if you were non-UK resident.
By utilising the carry forward facility, as well paying the maximum you can in the current tax year, you could pay a lump sum of up to £180,000 into your pension and benefit from tax relief – which will soften you reintroduction to the realities of the UK tax system somewhat.
You can also continue to pay £3,600 gross for five years after you leave the UK, even if you have no relevant UK earnings. However your options for this will be much more limited if you only look into it after your departure.
Remember that all the figures you have read here apply to both you and your spouse or partner, so you should look to take advantage of this for both of you.
3. Consider consolidating your pensions
If you have more than one pension arrangement, you might want to consider consolidating them into a single arrangement.
Having one plan to keep track of once you’re living abroad, rather than a series of different arrangements, could help to make it easier to manage your retirement savings. This might be especially useful if you have accrued pension funds through different employer-sponsored schemes as well as your own personal plan. Some pension providers regularly have call waiting times in excess of 30 minutes, so imagine having to call round five or six of your historic pension companies all from overseas!
A single arrangement could potentially reduce your costs, as investment and administration. Charges will still be applied to every pension you have, even if you aren’t making contributions.
However, care is needed that you consider the impact of transferring your pension if you would lose some valuable guarantees on the original pension or a low charging structure that may have been subsidised by a previous employer.
To find out whether consolidating your pensions is a good idea, please get in touch for expert advice.
4. Review your investment strategy
Once you’re settled abroad, your UK-based investments may naturally not be high on your list of priorities, so it makes sense to thoroughly check your holdings before you move.
Before jetting off, ensure your investment portfolio and asset allocation are still designed to meet your needs and match your attitude to investment risk.
This can help you to feel comfortable about leaving your money invested while you are abroad.
We would also recommend that you continue to review your UK investments on at least an annual basis going forward – especially if there are any major changes to your circumstances or future plans.
5. Check your State Pension
Your State Pension isn’t a massive amount of money – from April 2023, the maximum annual pension that you can receive went up to £10,600.
However, it’s still worth having, and worth maximising as far as possible. After all, it’s guaranteed to be paid for as long as you live and will increase in line with inflation each year.
So, before you leave the UK you should check the government website to find out how much State Pension you are currently entitled to, and from what date. Your next decision after you receive this is whether you wish to or need to make voluntary contributions while you are living overseas.
Get in touch
If you’re leaving the UK and would like to discuss your pension arrangements, please contact us by email or, if you prefer to speak to us, you can reach us in the UK on +44 (0) 208 0044900 or in Hong Kong on +852 39039004.
Please note
This article is for information only. Please do not act based on anything you might read in this article.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
Workplace pensions are regulated by The Pension Regulator.
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