ASK TOM I’m moving abroad. Will I pay tax in the UK on my pension withdrawals?

Anyone in this situation needs to understand something called QROPS

I’m 55 next year and able to access a private pension I’ve built up in the UK. My wife and I are in the process of emigrating to Thailand on a retirement visa and once resident in Thailand I’m wondering if I can take the entire amount of the private pension without paying tax on it in the UK.

I’m aware of the tax position on income in Thailand but have been unable to find an answer to the above. Can you help? This pension is not our main income.

Tom Selby, AJ Bell Head of Retirement Policy, says:

Retiring abroad remains the dream for lots of people, and it’s important to get your financial ducks in a row before making the move. One of the key things to think about is the tax implications for your private pension.

How much tax you pay and where you pay it is usually determined by where you’re considered to be a resident. If you retire abroad but are still considered a UK resident for tax purposes, you may have to pay UK tax on your pension.

If you are no longer a UK resident, you don’t usually have to pay UK tax on your pension, although you may have to pay tax in the country you live in. There are some exceptions to this – for example, civil service pensions are always taxed in the UK.

If you live in a country without a ‘double taxation agreement’, it is possible you will pay tax in both countries. However, Thailand has had a double taxation agreement with the UK since the early 1980s, so this shouldn’t be an issue for you. You will, however, need to tell HMRC you are a non-resident so they can send your pension provider an ‘NT’ (no tax) code.

As you’re considering retiring abroad, you may have come across ‘qualifying recognised overseas pension schemes’, or QROPS.

A QROPS is a type of overseas pension plan recognised by HMRC that can receive pensions built up in the UK.

You do not have to join a QROPS if you want to retire overseas – private or workplace pensions can be paid to you wherever in the world you decide to retire.

If you join a QROPS established in the country you reside in, you’ll get your pension in local currency and so avoid the uncertainty of exchange rate rises and falls. However, this isn’t an option in Thailand as there are no QROPS based there.

Transfers to QROPS are subject to a 25% HMRC charge unless any one of the following conditions are met:

• You are resident in the country where the QROPS receiving your transfer is based

• You are resident in a country in the European

Economic Area and the QROPS to which you are transferring is based in another

EEA country

• The QROPS to which you are transferring is an occupational pension scheme and you are an employee of a sponsoring employer under the scheme

• The QROPS to which you are transferring is an overseas public service scheme and you are employed by an employer that participates in that scheme

• The QROPS to which you are transferring is a pension scheme of an international organisation and you are employed by that international organisation

Anyone who wants to open a QROPS will likely need to go through a regulated adviser. If you do so, make sure you know exactly what you’ll be paying in costs and charges – both for the advice and investing through the new scheme.

It’s worth noting that if you are under age 75 and transfer to a QROPS your fund will be tested against the UK lifetime allowance. This is currently set at £1,073,100 and any pension savings above this level will be hit with a charge of 25%.

Send an email to asktom@sharesmagazine.co.uk with the words ‘Retirement question’ in the subject line. We’ll do our best to respond in a future edition of Shares.

Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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