Question for them that's retired and live overseas.

[Dan Winterroll]

As I shall shortly be one of the pension collecting part of the PPruNer membership. I have a couple of questions to anyone who is retired and living abroad. Can you:

1. Get you pension paid in a foreign currency in a foreign bank account?

and

2. Are you all paying UK income tax? (you may want to PM the answer to that one!)

Many thanks

Dan

[Cabbage_Crate]

...and he has told me that yes it can be paid abroad and will be sent at the Pension Agency's cost but it will ALWAYS be subject to tax deducted at source in the UK.

[Capetonian]

There is no simple answer as much depends on your country of choice.
You will find al ot of useful information here, and if you call them, they are outstandingly and unfailingly helpful, or at least always have been to me.


Pensions for Britons living abroad : Directgov - Britons living abroad (http://www.direct.gov.uk/en/BritonsLivingAbroad/Moneyabroad/DG_4000013)

[thefodfather]

I left both the RAF and the UK earlier this year to move to Germany. I know you can have your pension paid overseas, I'm sure someone will be along soon who does. I keep mine paid to a UK account, mainly because of the awful exchange rate with the Euro. In terms of tax, in most cases military pension are taxed at source. Although if the pension is your only UK earnings you can apply your full tax free allowance against it. Having left at 38, it means my pension is almost tax free, but not quite. The key is to fill out Form P85 and return it to HMRC so they tax you pension correctly. I've heard that some countries have dual taxation agreements so you get it gross from the UK and pay tax in your new country. I'm sure there was a pprune thread about it. Any other questions, feel free to PM me.

[Two's in]

...and he has told me that yes it can be paid abroad and will be sent at the Pension Agency's cost but it will ALWAYS be subject to tax deducted at source in the UK.

That's it in a nutshell. Quite how your new country of residence views your "unearned" offshore income depends on the country. Although if you pay UK tax, it's then an easier discussion to have about not paying even more tax.

[F.O.D]

I looked at both these questions for France and I concur that the answer is yes, you can be paid your pension to an overseas bank account in the local currency and you will always pay income tax at source in UK. Although it is heavy going, the HMRC website gives a description of taxation agreements with various countries so that you dont get taxed twice! It also explains the tax position for expat Crown retirees.
Regards

F.O.D

[Not Long Here]

I have my pension paid into a UK Account so I can move it to NZ when the exchange rate suits me.

The pension is paid gross. Under NZ taxation law I have to declare worldwide income so it was far easier for me to deal with a single tax authority and pay all my tax in NZ. UK inland revenue agreed to that process. Just filled in a form, and sent it to the UK via the NZ IRD.

So it is not ALWAYS taxed at source - depends on your circumstances and the tax people are invariably helpful if you are upfront and not just trying to avoid tax altogether

[Waddo Plumber]

I left at the 38/16 point, then had a second career in the aircraft industry. I live in Lanzarote and with the dual taxation agreement, my service pension is taxed by HMRC in UK and my private pension by the Hacienda in Spain. I (legally and correctly) get my UK and Spanish personal tax allowance. Both pensions are paid into a UK Bank, and I use a Forex company to transfer money as and when I need it.

[BANANASBANANAS]

Guys, Before you claim your first pension payment, Google 'QROPS' (Qualifying Recognised Overseas Pension Scheme). It is not ideal for every situation but can save (and make) you a fortune. You transfer your MOD pension into an overseas (offshore) pension and it grows tax free (16% last year) and is paid tax free from UK point of view. There may be a tax liability in the country you have retired to - but there may not. For example, we will retire to Malaysia and Malaysia only taxes income that is earned within Malaysia and will therefore allow me to claim my RAF pension (converted to QROPS) tax free.

The other big benefit is that the total value of the fund does not die with you as you never have to purchase an annuity - the fund is yours to bequeath in your will - a huge benefit.

There are some good fund managers in Guernsey. I obviously won't name names on this forum but please PM if you would like more details - I have no financial incentive to recommend any particular company.

[AlpineSkier]

Guys, Before you claim your first pension payment, Google 'QROPS' (Qualifying Recognised Overseas Pension Scheme). It is not ideal for every situation but can save (and make) you a fortune. You transfer your MOD pension into an overseas (offshore) pension and it grows tax free (16% last year)

The 16% growth is a foolish thing to say. That has nothing to do with QROPS but simply the investment you chose. It might equally have dropped 16%

[cazatou]

Bananas Bananas

Unless HM Revenue and Customs have changed the rules I think you will find that HMG reserve the right to tax "Government Pensions" in the UK irrespective of where you are resident in the World. My Military Pension, my Wife's Teachers Pension and our State Pensions are taxed in UK although we are resident in France.

Of course if one emigrates to a Country which does not have a "Dual Taxation Treaty" with the UK then you could end up paying tax in both Countries.

[fergineer]

concur with Not long here in NZ I have my money paid here but at the moment I pay the UK tax and my accountant here works out how much I pay in Kiwi tax on it. May soon change and get it paid gross over here so there is just the one tax, should make it easier.

[F.O.D]

I can recommend the HMRC website that tells you all about double taxation agreements and residency rules. For example, on the HMRC site, DT 1927 states that UK government pensions paid to non-UK residents are taxable in UK (hence my earlier comment). However, if you delve into the detail, it would appear that UK Govt pensions paid to residents of Australia, Canada, New Zealand and Cyprus are exceptions to the general rule and can receive UK pensions tax free. The bottom line is that you need to check the double taxation agreement for the country of your new residency.

[BANANASBANANAS]

I think you may have misunderstood my post. Once you move into QROPS it is no longer a government pension. It becomes a private, offshore, pension. The fund grew 16% last year. Historically that is about par for the course. It is totally free of UK taxation and is only subject to tax (if applicable) in the country in which it is drawn. In my case this is Malaysia and is totally tax free.

Get a transfer value from Glasgow, transfer the funds offshore and let QROPS do the rest.

I'm no expert but it does work. Just google QROPS and see for yourselves.

From google: Quote:

QROPS for UK Pensions

Qualifying Recognized Overseas Pension Scheme

QROPS is a new International Pension Scheme which was launched in April 2006. It allows for non-UK tax residents who are overseas and currently hold a UK pension which is registered with Her Majesty’s Revenue & Customs ("HMRC") to transfer these pension assets to a “Qualifying Recognized Overseas Pension Scheme” named QROPS.

A QROPS is structured in a similar manner to a UK pension, i.e. there is an investment vehicle which is owned on your behalf by a pension administrator (trustee). The difference arises where the pension administrator is based outside the UK and only reports back to HMRC, after the QROPS has been running for five years there will no longer be any obligation to report to the UK HMRC.
Benefits of converting to a QROPS

Potential for payments to be received without a deduction from the UK taxation department. (Individuals will be responsible for declaring the income in their own country of residence.)
Investments domiciled in any major convertible currency.
No requirement to purchase a compulsory UK annuity within QROPS.
Low minimums and no age restrictions on plan entry.
Fees based on a sliding scale.
Access to leading investment advice and managers.
Ability to hold unique investment vehicles.
Flexibility of choosing your own investment strategy.
Unquote:

[ColdWarWimp]

I am resident in Cyprus, my pension (Military and OAP) is paid in Euros. The exchange rate is better than market rate due to the vast sums the UK government changes daily.

My pensions are taxed at 5% on the gross received.

Win win!

And the home heating costs are lower.

CWW

[eng007]

I moved to Canada last year and it has a Tax Agreement with the UK which means that my pension is not taxed by the UK Government - just the Canadian Governement. HMRC Website has a list of places where there is a tax agreement which allows this.

[RAFEngO74to09]

Check all the detail in any Dual Taxation Agreement for your country of choice on the HMRC website. For instance, in the USA, HMRC will continue to tax government-sourced pensions until you become a US citizen at which point you can elect to pay tax in the USA instead (would be 10% for me at current rates). You can apply for US citizenship 5 years after being accepted as a US Permanent Resident ("Green Card" holder).

[1771 DELETE]

I live in the US, presently have the pension paid into a UK account and therefore taxed by the UK.
The UK has a dual tax agreement with the US federal government but not with individual states, therefore the UK earnings have to to be declared in the state of residency and taxed.
Now as a US citizen, i can elect to have my pension paid direct to a US bank account with no UK tax liability, this is very straight forward and not a problem.

[Exascot]

My RAF pension is paid direct into my bank account here in Greece. I asked my UK financial advisor about Qrops.

This was his reply:

Qrops (Qualifying Recognised Overseas Pension Schemes) are really for those who are not yet in receipt of their pension benefits. If you have a pension in the UK and move overseas you can now (subject to certain guidelines) transfer your pension to one in the country you move to, which may then be subject to less stringent rules than those of the UK, giving potentially more flexibility when taking benefits. As you are already receiving your pension benefits this is not really relevant. Your wife may not yet be receiving her RAF pension, but it will still be the wrong advice to transfer a quality final salary scheme away to a personal pension so again would not suggest any action be taken.

If it could be summed up in a one liner, the main advantage of these schemes is the ability to generally take a larger tax free lump sum than the 25% restriction under the UK pension rules.

[Wander00]

There is currently some difficulty in France over this issue as different French tax offices are using different interpretations of the double taxation agreement between France and UK. I am back in UK in a couple of days and will send the information I have to the Forces Pension Society to see if they can resolve gthe issue. fortunately there is no problem with my tax office (Fontenay le Comte (85)).

[parabellum]

I live in Australia on a long stay Temporary Residents visa and do not require to declare overseas income to the Australian authorities that is taxed in UK.

I get the benefit of the UK tax free allowance applied to UK earnings and the Australian tax free allowance on my Australian income. It may not pay to go for the tax-free in UK option if the tax payable in, say, NZ is going to be higher than splitting tax paid between the two countries.

In several countries, Australia included, the UK pension stays frozen at the date it was first drawn or you leave the UK, whichever is the later.

[hello1]

I will be leaving the RAF and the UK in the next couple of years to live in the US. Do any ex-military US-based Ppruners know how the lump-sum gratuity is treated for tax purposes in the US. It is clearly tax free in the UK but I don't want to find out that on moving to the US, the IRS think that a large proportion of it belongs to them?

[TheNightOwl]

I left the RAF and the UK in July, 1983, after 22 years in the mob.

My Service Pension is paid to me here, by cheque, and I bank it when the exchange rate is most beneficial to me. The problem with this is that, with the Aussie dollar so strong wrt the US dollar, my pension value changes monthly. It is index-linked to the UK CPI, which means a slight annual increase, except in 2010 when there was no increase at all as the CPI was negative.

I have an entitlement to a UK Age Pension, which is pegged (no increase EVER) to the rate at the time I left the UK. This is paid directly into my account here, at the rate decided by the authorities - I had no option about this.

I do not pay UK tax and, when I told the Australian Tax Office that I would avoid Aussie tax by having my pension paid into a UK account, I was told, in no uncertain terms "...after you have paid your eligible UK tax, then we will charge you Aussie tax-rates on the rest..."!! At that point, I gave in.

Edited to add that I am an Aussie, as well as UK, citizen.

Hope this is some help.

Kind regards,

The Night Owl.:confused:

[sisemen]

Yep. The exchange rate hurts like hell at the moment. Every 10 thousand quid that I change I lose $10,000 compared to a few years ago.

[parabellum]

hello1 - If you time your move to the USA to arrive on or after the first day of their new tax year, having already been paid your gratuity lump sum in the UK, then I would have thought you could legally avoid USA tax on it?

[hello1]

Thanks for your tips - I had considered the arrival after the 1 Jan start of the US tax year but as I will be leaving in March, this is slightly tricky! I will sit down with a US accountant in the next few months and talk things through.

[FFP]

Would be interested to hear what comes of it hello1. I'd have thought that as long as the gratuity is paid before you become resident, then you're ok. Taken to it's extreme, you're not paying tax on the money you are earning now ?

[Hydraulic Palm Tree]

The Night Owl & Parabellum

As there is a dual tax agreement with Oz, you are required to declare all UK income regardless of whether it is taxed in the UK or not. If is is taxed in the UK, the amount of tax paid is taken into account by Oz and you do not have to pay any more if the amount of tax paid is equal to or greater than you would pay in Oz.

HPT

[gonesurfin]

Moved to the US in 2005, I had my redundancy/gratuity paid into a UK building society. Subsequently decided to have my pension paid into the same...the interest rates were pretty good back then. I use a Visa from the same society, they do not charge me any extra for the transactions but the exchange rate does change. If I need large amounts of cash, I have it wired to my US bank account for a nominal fee.