Are we entitled to a tax-free pension if we live abroad?

[OKOC]

I am thinking of moving abroad to live on a permanent basis. Does anyone know if I can get my RAF pension paid gross ie without UK tax being deducted? I seem to remember seeing some time ago a list of countries where this was possible but can't remember where! Yes, I know I'm old and forgetful:rolleyes:

[threeputt]

Is that a bit like an island or am I being dull?

3P:ok:

[Pontius Navigator]

OKOC,

No. You will pay tax whereever. The trick is ensuring you pay the least tax.

So yes, you can get your pension paid gross. You can get it paid into a UK account or, I believe, into an overseas account. There was some discussion on pprune on the best way to do this. I believe it was to agree exchange rates in advance and then only effect the transfer if the rates were favourable. You really need a profesional advisor as you are not talking simple in-house schemes but schemes that apply to everyone.

There are also issues on OAP pensions too. In some countries these are frozen at the applicable rate when you draw it, in others it remains with the UK index linking.

[D-IFF_ident]

I think it depends on where you plan on living too. The State pension issue, which is currently being challenged, relates to Commonwealth countries. A search on Pprune would be worthwhile, and there are other forums discussing the issue, although I can't remember where - Google is your friend...

Good luck.

[cazatou]

OKOC

You need to check the Double Taxation treaty between your intended Country of Residence and HMG. In general HMG reserves the right to tax "UK Government Pensions" in the UK irrespective of where you are resident. My Wife and I are both taxed by HMG on our Occupational Pensions (She was a College Vice Principal) and are thus exempt under the UK/France Treaty from French income tax on those Pensions. The Treaty does not refer to other Pensions paid out of UK public funds such as the DSS old-age pension; except that certain disability pensions paid to members of the UK Armed Forces are exempt from tax in both the UK and France.

NB This may not apply in the Treaties concluded with other Countries!!

Good Luck!!

[Captain Sensible]

When you move overseas, you'll get the yearly P60. If you have no other "unearned income', say rent on property, you'll still get tax deducted from the RAF Pension at source I.A.W. your Final Tax Code, which is basically anything over your personal allowance. Income earned from other stuff such as rent, sale of property etc., all has to be declared, but it's not very difficult, get an accountant or financial advisor with expertise in overseas living if you're not sure.

[Two's in]

Pontius is right,

No. You will pay tax whereever. The trick is ensuring you pay the least tax.

Finding the lowest rate is the secret, you are liable for tax on it anywhere in the world. And don't pay a tax advisor more than you will save for his advice!

[Al R]

Okoc,

DT has been mentioned - this may be useful.

http://www.hmrc.gov.uk/cnr/app_dtt.htm#3

As your pension is deducted from your allowance, all pension is paid gross, but if you're not domociled in the UK and not drawing from the range of collective benefits that one's tax pays for, then your UK pension should not be subject to UK tax. Tell HMRC that you will not be resident and they should issue an NT (No Taxation) code number for your pension. Tread carefully though. By 2012, all public service and sector pensions should be linked to AEI, and not RPI, and you might lose that undoubted benefit if you have your pension paid directly overseas.

You don't say if you'll be a working ex pat, or retired and you'll need to provide evidence to HMRC of your long term aim to remain there, wherever it might be. If HMRC accepts this, you'll be treated as non-resident so long as your absence covers a complete tax year and you live abroad for three years or more. You'll be limited to the amount of time you return here (something like 3 months a year). But if you can't confirm that you have gone abroad for good, you'll remain resident in the eyes of HMRC at least, for three years or so (but then you can claim back any tax paid).

Also, what is the taxation situation where you intend to go to? Is it even worse than here? Also, will you have any other earnings to potentially offset? Pensions are paid gross and taxed as earned income as you probably know and it might be that if you have no other incoming revenue, your earnings threshold won't be reached and the issue of taxation could be moot anyway. Be careful too, if you try to be clever and chuck it offshore. If you decide to move back to the UK, you'll probably get stung, badly. If you don't need the money to live on, then you can invest in another pension anyway (it won't be recycled cash), and then the g'ment will treat it as net, and bump up your contribution - mitigating potentially, the impact of any tax.

Are you married.. are the couples benefits going to be more advantageous if you adopt an approach other than the obvious one? Also, a point to consider is your age - you don't say how old you are. Don't forget, that by the age of 75 (at the latest) you have to take out a secured or alternatively secured pension anyway, and is age allowance an issue? When your income goes above a certain level, that extra age allowance starts to be raked back. The current income limit is about £21k. If your income from pensions, taxable interest etc. is below this, you get the full higher age allowance. If your income is over that, you'll lose £1 of the higher allowance for every £2 of income above this point.

In essence, whatever the HMRC regs say about this, take proper and considered advice which relates to you. What might be beneficial for one person with one particular set of circumstances, won't always be the best choice for the next.

[Beatriz Fontana]

Al R? How much do you charge for financial advice and can I employ you as my financial advisor? Marvellous response!

[D-IFF_ident]

OKOC, how about telling us what coutnry you're heading to and whether you'll be working. Maybe someone might know your exact situation. While we're on the subject, anyone know the best way to reduce taxes if one emigrates and joins somebody else's Air Force?

[OKOC]

Thank you all for taking time to reply--I'm off to France and will probably earn £1k per month on top of the RAF pension.

[Pontius Navigator]

OKOC, you should also mention your age as your OAP is a factor too.

[iceni]

See....

www.britishpensions.org.au

Is a large web site.

[OnaBeach]

OKOC,

As most people have suggested, it's a personal choice on what you do. I would suggest getting some good advice before making a decision.

The Forces Pension Society gave a very good presentation at the Financial Resttlement Brief which is well worth attending at your nearest RRC.

Essentially you can elect to do one of 2 things:-

1. Do nothing. Leave your pension to be taxed at UK rates determined by your tax free allowance and pension income. Xaffinity Paymaster will use PAYE coding to determine your contributions. Net pension is then paid into your nominated UK bank account.

2. Fill out form P85 before you leave the UK to apply for Non-Resident status and return to the Tax Office at Cardiff. Cardiff will then issue you a form to fill in and get stamped up by your tax office in the country you have moved to. They will effectively state that you are now paying tax in your new country. This is then returned to the address on the form (Nottingham Tax Office). If all is in order, Nottingham will instruct Cardiff to give you an NT(No Tax) code. This code is then passed on to Paymaster who will start paying your pension income into your nominated UK bank account tax-free.

If you choose option 2 then you will be entitled to claim back all UK Tax paid since the day you left. You do not have to wait 3 years, you only have to state that you intend to reside permanently outside the UK and will not stay in the UK for more than 90 days in any tax year. You can then elect to either continue to have your pension paid into a UK bank account, or if the country you move to is on the Paymaster approved list you can choose to have it paid each month into an overseas account, using the TAPS(Trans Atlantic Payment System).

As discussed in other replies you will need to check out your destination country for a Dual Tax Agreement with HMRC. My experience is for Australia which is part of the agreement.

I have just done option 2 and at time of writing this the whole procedure has taken 7-8 months. Things are obviously subject to change and I would suggest a few phone calls to check on latest procedures at HMRC- Taxation for Non-UK Residents, they were very helpful. Do not call JPAC as they were utterly useless(as expected).

Hope this helps

OnaBeach

[Al R]

Beattie said: Al R? How much do you charge for financial advice and can I employ you as my financial advisor? Marvellous response!


lol

You should see me with futures. Mine in particular. ;)

[Winch-control]

I believe Oz has a recipricol agreement. I will press to test next month (end of first year in Oz and am using an ex UK advisor now 6yrs in Oz) Oz tax consultant for advice on UK pension. Last year saved me 900Ausd, lets see this year...and I will let you know on here. Military pension is another ball game and I myself have received other advice from pprune, so will follow up both.

[erduso]

The short answer is no. Occupational pensions paid by the UK Government to an individual (eg, former RAF employee) are taxed at source in the UK.

[Not Long Here]

Erduso,

You are perpetuating a myth. HMRC will take into account an individuals circumstances. I have chosen, and HMRC have agreed, that my worldwide income is taxed in my country of domicile, New Zealand. This means I only have to deal with one Inland Revenue and includes my RAF pension which is now paid to me gross in the UK and then taxed in NZ.

[Winch-control]

Perpetuating a myth? please pm me if you are sure it has to be uk taxed. This is not the advice I have....Pointus please get in touch....pm me please

[dum_my]

Erduso

Not so simple. As others have already said, it depends on the Double Taxation treaty between the UK and the foreign country you go to. In the DT treaty with my particular foreign country, I can receive my MOD pension gross if (a) I am resident in said country, AND (b) I take citizenship of said country. I have residency, but not citizenship (at the moment). So I receive my MOD pension net of UK tax. I declare this on my foreign tax return, and they give me a tax credit for that amount.

[OldBonaMate]

If you live and work abroad, you should check the dual taxation agreements between your overseas country of residence and the UK. I have been living and working outside UK for the last 7 1/2 years and I pay no UK tax. My RAF pension is paid into a UK bank account and I draw it by cashing a cheque for pounds sterling at my local bank where I have my overseas account. I will shortly be drawing my OAP and the same will apply. However, I am living in one of the commonwealth countries that is subject of the current court battle with HMG through the European Court of Human Rights. Until that problem is resolved, hopefully in the ex-pat's favour, my OAP will be frozen at the rate at which I first draw it; however, my RAF pension continues to be indexed.

Sounds good, but there is a twist that I expect will apply almost anywhere and that is that one must declare one's "world income" in the country of residence, where it becomes subject to local tax as part of the overall income. In order to stop paying the UK income tax I had to complete some paperwork that was submitted through my local tax authorities to the UK tax people. Furthermore, I did not have the choice of where I pay tax; I must pay here. If I were not to declare my world income, I would be laying myself open to being charged with tax evasion even if I continued to pay UK tax on the UK income. Basically not worth the potential for a criminal record.

My RAF pension could be paid direct to my local bank but I prefer to retain my UK account as I can then take advantage of the fluctuations in the exchange rate. In addition, the arrangement I have with my local bank is particularly attractive and not subject to any fees; instead I get a very slightly reduced exchange rate. The tax on my UK income is calculated on an average exchange rate for the tax year in question.

[Dinger154]

Well, my military pension is paid into my bank account monthly and it's paid gross. It's up to me to declare it on my tax return, if I remember !

[Pontius Navigator]

Well, my military pension is paid into my bank account monthly !

Military pension and only 34 years of age, that is going some.

Seriously, the tax man will find you out.

[fergineer]

I still pay UK tax at source on my pension but as I live in NZ I have to declare it to the IRD here and they tax me on the difference between the two countries, am looking into getting it tax free in the UK as it makes it easier sorting the tax out here ie only paying the one tax sum.

[Not Long Here]

fergineer,

Its extremely straightforward. Just write to HMRC saying what you would like to do. They will send you a form to complete, it then has to be routed via the IRD back to HMRC.

At the end of the next tax year you will end up paying the tax on your pension in 3 installments, July, November and March and it all gets reconciled through your end of year tax return.

Cheers

[navibrator]

The answer is no - irrespective of what any so called FInancial Expert has said here. Ask the Inland Revenue in Cardiff!

[navibrator]

I have never heard such twaddle peddled on these pages re finance. For example, you dont have to declare your world income. It depends which country you are living in. And some ought to check - the pension is paid NET of tax, It is already taken!

[Not Long Here]

navibrator,

If the answer is no, why are some of us here receiving our pensions gross? :}

[dum_my]

navibrator,

If you read HMRC's own explanation: http://www.hmrc.gov.uk/cnr/uk_gov_pensions.htm

and/or talk to the helpful ladies on (+44) 029 2032 5058,

you will discover that the answer can easily be a yes.

[ArthurR]

I get my RAF pension paid in Germany, and no I do not pay british tax...have to declare it when I fill in my tax forms for here though...Maybe

[Dan Winterland]

Its up to you how it's taxed. When I first got mine, it came gross. I asked for 40% tax to be deducted at source so that I didn't get a shock at the end of the year. Then when I moved overseas, I got it paid at the basic rate less personal allowance.

And yes, any UK derived income is taxable.

[Flyingblind]

The Crown giveth and the Crown doth taketh away.

HM's Government are never last in the queue for your coin!

[Pontius Navigator]

Dan, you remind me, the tax man wrote to me and suggested how I would like my pension taxed. We agreed, I think, that my allowance would go to my salary and my pension would be paid net.

Not sure how it works but I usually owe the tax man a few hundred each year.

[Hueymeister]

Which countries can you livein and STILL get your pension index linked? I'm planning on moving to Canada in 12 months time.

[Pontius Navigator]

Huey, the ones next door but not that one. You are of course talking of your State pension and not the others.

[cuefaye]

I've been there for several years (Oz), and since returned. Listen to Al - he has very good advice!!

[TheShadow]

I've been receiving an RAF disability pension since age 53 due to injuries received in the Middle East on secondment. My question is whether or not I should have been paying tax on that pension for the last 14 years - whilst living in OZ? .......obviously because I have been paying UK tax. Maybe I should ask PAYMASTER?

I know that Vets Affairs disability pensions are NOT taxable in OZ.... but inconsistency is evident everywhere.

Anybody cluey on that aspect of UK military pensions?

[Hubstrasse]

Right! - angry head on - I went through this quite recently. Diligently filled in HMRC tax return figures for mil pension and, since it asked for "all other income" I diligently filled in disability pension figures and nil tax paid along with explanatory notes citing relevant legislation authorising such. I was very grumpy to receive a large tax demand with indecent haste and so dispatched a snottergram. I received a reply correcting the figures (no tax) but explaining that your return is read by machine so please do not include income that does not attract tax! In other words declare everything but not everything!!! Also I am involved with Veterans in NZ who mistakenly believed tax was payable on disability pensions. I have the legislation references for UK and NZ which state that it is not. Re many other posts check with your own country of residence and ask for the relevant ref..... and relax

[Wensleydale]

Having investigated the matter thoroughly, I have decided to change my name to Google Starbuck. It is a simple thing to do: my cousin recently changed his name to YV07 TZW because this was cheaper than buying a personalised number plate for his car.

[TheShadow]

a. Any chance of getting a citation of those regs re disability pensions not being taxable (in UK or overseas)?

b. I am loathe to debate with HMRC because each time I've done so it's cost me more

c. And any correspondence with Paymaster would seem to be futile - as they simply apply HMRC tax-codes with gay abandon.

d. And if "gay abandon" leaves you feeling a little queer, remember that now that little queer can be your legally accredited spouse.

[MPN11]

Jersey Resident. Went through the hoops in 2011, when the Jersey Tax authorities wrote and said ""… you still appear to be suffering UK taxation on your occupational [RAF] and social security [State] pensions …" In our case, they were unable, under their regulations, to allow double tax credit as a 'Tax Information Exchange Agreement' came into force on 6 Apr 11.

As a result, we were required [no option] to complete HMRC Form DT/Individual - as a result of which our RAF and State pennons are now paid gross to our UK bank accounts, and subsequently taxed in Jersey.
__________

We have no UK-based income at all [savings/investments are offshore, here].
However, the geniuses at HMRC in Cardiff still keep pestering me for a Self-Assessment tax return :confused:

[ian16th]

Hueymeister,
http://www.britishpensions.org.au/CF%28N%29701.pdf

Sorry to tell you that Canada is on the 'Frozen List'.

A slight candle flicker of hope:

Lifeline for expat pensioners as MPs try to change law - Telegraph (http://www.telegraph.co.uk/finance/personalfinance/pensions/10285484/Lifeline-for-expat-pensioners-as-MPs-try-to-change-law.html)

I have e-mailed these two worthy Knights, and had a reply from Sir Roger, his words 'I fear hat the Treasury may prove intransigent.' are not encouraging.

May I take this opportunity to ask the UK based PPRuNe'rs to lobby their MP's and ask them to support this amendment?

My e-mail to the two Knights contained this:

Sir Peter & Sir Roger,
It is with great joy that I read of your efforts to amend the Pensions Bill, to 'un-freeze' all overseas pensions.
This is a message of thanks and support.
I am a Royal Air Force veteran of 13 years service and an active member of the Royal Air Forces Association. As such I am aware of other, older, RAF veterans who are dependent upon the charity of the Royal Air Force Benevolent Fund. This is because of the miserable pittance that they receive as British Pensioners.
This is happening in South Africa, a country where a corrupt government is itself receiving charity from UK Foreign Aid.
Gentlemen, may I wish you all the luck in the world with your efforts.