Can I Contribute to a UK Pension When Living Abroad?

In this article, we delve into the intricacies of contributing to a UK pension from overseas, looking at the options for expats planning their financial future while living abroad.

Arjun Kumar
Arjun Kumar
Oct 6, 2023

Can I Contribute to a UK Pension When Living Abroad?

Retirement planning is pivotal to ensure your financial security during your post-retirement years. If you are no longer in the United Kingdom but were part of a pension scheme while residing there, you might be wondering whether you can continue making contributions. The answer is yes, it is possible to contribute to a UK pension while living abroad, but several factors come into play.

Contributions to Pension Schemes From Abroad

If the scheme rules allow, anyone can be a contributor to the UK-approved pension scheme, no matter their residency status. That said, tax relief is only available for “relevant UK individuals”.

A relevant UK individual is anyone who:

  • has UK earnings chargeable to UK income tax for the tax year
  • is a UK resident
  • was a resident of the UK in one of the past five tax years and was part of a UK pension scheme during their residency
  • is a Crown Servant or a civil partner/spouse of a Crown Servant with relevant UK earnings.

How Much Tax Relief Is Available?

You have to pay tax on your UK-based pensions except that of State Pension, where UK non-residents are not obliged to pay tax.

Tax relief application scenarios are as under:

  • Relevant UK individuals with an annual UK relevant income of £3,600 or more a year can attain up to 100% tax relief on their contributions. However, any individual whose contributions are more than the annual allowance is subjected to a tax charge.
  • Relevant UK individuals with non-relevant UK earnings or a relevant UK earning of £3,600 or less will get tax relief only on their contributions up to £3,600 a year.
  • Non-relevant UK individuals with non-relevant UK income will not receive any tax relief on their contributions.
  • If you are a UK non-resident, the ability to contribute to pension schemes will vary based on your provider.

Also read: How Do I Claim UK Tax Back from Overseas?

Five-Year Rule for Non-UK Residents

If you move abroad from the UK, here's a simple rule to remember about contributing to your pension:

First Year Abroad: In the year you leave the UK, you can contribute up to 100% of your UK earnings or £3,600 (whichever is higher) and get tax relief.

Next Five Years Abroad: For the following five years, you can still contribute up to £3,600 a year and receive tax relief. However, you must contribute to a pension scheme you were part of before leaving the UK. This applies if you have no UK earnings. If you do earn money in the UK, you can base your contributions on that income or contribute £3,600 a year (whichever is higher).

Here is an example to simply this rule for you:

Let’s consider Jackson moved abroad in September 2022 and was contributing £5,000 to the UK pension pot. If we assume that Jackson has earned £5,000 in the tax year 2021/22, he can continue to contribute £5,000 in that year.

However, his maximum tax-relieved contribution will be reduced to £3,600 annually from April 6th, 2023, and this limit applies for five tax years, including 2022/23. So, he can contribute up to 5th April 2028.

After April 2028, Jackson can continue contributing any amount, but it won't receive tax relief. Providers generally can't accept non-tax-relieved contributions, so they might stop collecting after 5th April 2028.

Remember, if Jackson returns to the UK during any tax year, the five-year rule "resets," meaning he gets another five years of tax-relieved contributions.

If you want to learn more about paying tax as a UK non-resident, then check out this guide.

Final Verdict

It's important to understand these rules to manage your pension contributions effectively while living abroad. If you want expert advice on your UK tax obligations while living abroad, contact our tax experts now.

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