Pension contributions for customers who move overseas

These FAQs are for financial advisers only. They mustn’t be distributed to, or relied on by, customers. They are based on our understanding of legislation at the date of publication.

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In general, Aegon will only accept new applications for pension business from customers who are habitually resident in the UK when they make their application. This means that a person’s main permanent residential address must be within the UK and that is the address that they complete on their application form. The reason for this restriction is that pension providers, including Aegon, need authorisation from the Financial Conduct Authority (FCA) to sell products to individuals and this authorisation has geographical limits. Aegon is authorised to sell only to individuals who live in the UK (for the avoidance of doubt, people who live in the Channel Islands or the Isle of Man would not be classed as being habitually resident in the UK). However, there are four known exceptions to this general rule:

  • for people abroad in Crown employment (or their spouse/civil partner), which results in them having a non-UK address. 
  • for Trustee Proposed Section 32 contracts provided the trustees are UK based. 
  • for overseas employees joining a UK occupational pension scheme that has UK based trustees.
  • for certain Aegon group personal pension schemes, it is possible for an employee with a Republic of Ireland address to join the workplace pension scheme offered by their UK employer (who will typically be based in Northern Ireland), providing they have relevant UK earnings through their employment and they have a UK national insurance number. 

There will of course be existing customers who subsequently move overseas, and the various issues this can present are covered in the remainder of this FAQ.

The following options may be available to them:

  • they could continue to contribute to their plan (subject to certain conditions).
  • they could transfer their plan to a qualifying recognised overseas pension scheme (known as a QROPS).
  • they could leave the plan as it is until retirement, and have benefits paid to them overseas.

The first of these options is covered in the remainder of this FAQ. The other options are covered in separate FAQ pages.

Yes, this is possible although what can be paid depends on who wants to make contributions and if the customer’s earnings will be subject to UK income tax on moving abroad.  

If a customer continues to have relevant UK earnings (i.e. earned income subject to UK tax) after moving abroad, then personal contributions can continue to be made as before. The limit on personal contributions for tax relief purposes would still be the greater of £3,600 gross pa and 100% of their relevant UK earnings in that tax year.

If a customer doesn’t have relevant UK earnings on moving abroad (i.e. they’re being paid and taxed overseas), then they will only be able to receive tax relief on personal contributions of up to £3,600 gross pa for five full tax years following the tax year in which the person moves abroad. 

Please note that Aegon do not accept contributions that are not eligible for tax relief (for customers under the age of 75), so the limit of what they can receive tax relief on is also the limit of what Aegon can accept.

A UK employer can continue to contribute whether a person has relevant UK earnings or not, and corporation tax relief should be granted where contributions have been made wholly and exclusively for the purposes of the employer’s trade, profession or investment business. The employer’s local inspector of taxes will deal with any claim for tax relief. If contributions are to be made by a non-UK resident employer, then UK corporation tax relief would not normally be allowable, but it may be possible for the employer to make a claim under the tax system of the country in which they are based.

In practice, if a customer moves abroad they will need to inform their pension provider so that appropriate action can be taken depending on the person's circumstances. A customer should also inform their pension provider of any subsequent changes in their circumstances so that this can also be taken account of. Where a customer is making use of the five year rule to continue making personal contributions, the pension provider should keep a note to contact the customer at the end of the five years to find out if their circumstances have changed or not and to then take any follow-up action to continue or stop the contributions being made. 

Yes, this is possible although what can be paid depends on who wants to make contributions and if a customer’s earnings will be subject to UK income tax on moving abroad.  

Personal contributions to an occupational scheme are made under the ‘net pay’ arrangement. This means that they are deducted from gross pay before income tax is calculated so an employee will receive tax relief on any contributions at their highest marginal rate. If an employee is going to be working for the same employer and will continue to have relevant UK earnings (i.e. earned income subject to UK tax) on moving abroad, then personal contributions can continue to be made as before under the ‘net pay’ arrangement if the employee remains on the UK payroll. The limit on personal contributions for tax relief purposes would be the greater of £3,600 gross pa and 100% of relevant UK earnings. 

If an employee doesn’t have relevant UK earnings on moving abroad (for example, if they will be moving onto the payroll of an overseas employer), then personal contributions will not be eligible for tax relief through the ‘net pay’ arrangement as the employee is not likely to be on a UK payroll. 

A UK employer can continue to make employer contributions for an employee seconded abroad and corporation tax relief should be granted where contributions have been made wholly and exclusively for the purposes of the employer’s trade, profession or investment business. The employer’s local inspector of taxes will deal with any claim for tax relief. 

In practice, the only likely situation where contributions will continue to a UK occupational scheme on a person moving abroad is where an employee is moving abroad to work for the same employer or an employer in the same international group. Occupational schemes are not as flexible as personal pensions in being able to accommodate changes in someone’s circumstances.

It’s generally not possible for personal or employer contributions to re-start or be increased after a customer has moved abroad. For example, if someone was paying £100 pm gross as a personal contribution and then moved abroad, they could continue paying that amount or a lower amount for the five full tax years after they move abroad if they will have no relevant UK earnings. In other words, a customer couldn’t ask Aegon to increase their contributions after they move abroad (for example, up to the £3,600 pa gross limit allowed under HMRC guidance) as Aegon don’t have the necessary FCA permissions to accept a request to increase contributions from a customer living abroad. Similarly, a request to make a single contribution (as either a personal or employer contribution) or to transfer funds to another UK pension arrangement may also not be possible for the same reason. 

Contributions to, or benefit accrual under, a registered pension scheme will count towards the annual allowance, the money purchase annual allowance (if a customer has flexibly accessed any of their pension benefits) and the tapered annual allowance (for high earners). The normal rules about benefit crystallisation events will apply so most benefits will be tested against the lifetime allowance. 

Any annual or lifetime allowance tax charge is payable regardless of where the customer lives. These charges are not covered by any double taxation agreement in place between the UK and the country of residence.

Rebecca holds a group personal pension (GPP) plan with Aegon. She makes personal contributions of £6,000 pa and her employer also contributes £6,000 pa, and her current salary is £60,000.

In March 2017, she moves to Germany to work. She remains employed by the UK-based company but is now taxed in Germany. The following table shows the how the contributions would have to change going forward, assuming the intention was for the employee and employer contributions to continue:

Tax year Earnings taxed in the UK Gross annual personal contributions Gross annual employer contributions
2015/16 £60,000 £6,000  £6,000 
2016/17 £60,000 £6,000 £6,000
2017/18 Nil £3,600* £6,000
2018/19 Nil £3,600* £6,000
2019/20 Nil £3,600* £6,000
2020/21 Nil £3,600* £6,000
2021/22 Nil £3,600* £6,000
2022/23 Nil Nil* £6,000

* As Aegon can only accept contributions that are eligible for tax relief (for customers under the age of 75), her personal contributions must reduce to the limit of £3,600 for the first five full tax years after she leaves the UK, then reduce to nil after this.

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