Should I add extra funds to my UK pension if I work abroad?

08 July 2021

Question by Anne

I am 61. I currently work abroad and expect to do so until I retire at 65. Should I add extra funds to my UK private pension or am I better investing it elsewhere (since I won't get the pension tax break).

Answered by

Hi Anne, thanks for your question.

If you are are planning to retire in four years’ time then it absolutely makes sense to continue building up your retirement “pot” for when you return to the UK as planned. The more your save now whilst you are working, the more options you are going to have when you turn 65 and come back to the UK which is really important.

Before I answer your question, it is worth pointing out that when we are considering savings across different countries, things can get quite messy from a tax perspective quite quickly so it is always worth seeking advice from a professional who is specialised in multi-country tax laws and who understands the taxation system between the UK and the country from which you are currently working. This can help to ensure that you don’t use a product this is difficult to bring back over to the UK when you return if you do use something else as this can so easily cause problems further down the line.

Without knowing where you are working abroad and what the financial regulatory system is like there, it is difficult to give you a specific answer of UK pension or something else, however, I think the answer really depends on where you are currently working and what the tax system is like there. Although you do not receive tax relief on contributions made to your UK pension scheme whilst working abroad, if you are working in a country that has a low level of personal taxation, then continuing to use your UK pension for saving for your retirement can make sense as you won’t have paid a lot of tax on money that you would use to contribute to your UK pension. This therefore slightly negates the impact of not receiving tax relief on contributions made. This would also make things a lot more straight forward for when you eventually come back to the UK as your pension would already be registered here.

However, if you are working in the country that has a relatively high level of personal taxation, then this can make contributing to a UK pension less desirable as you are likely to be taxed on withdrawals made from your pension when you retire. This means that looking at an alternative place to save and invest for your retirement is something that is worth looking at. However, as stated above, I would recommend that you seek advice from a professional who understands the tax system between where you are currently based and the UK as this will make things far easier for you when you plan to return to the UK and potentially bring your savings with you.

If you work with anyone else from the UK who is based in the same country as you or someone who has returned back to the UK already, it is worth asking them what they did whilst they were working abroad and whether they could give you any tips or pointers.

I appreciate that I cannot give you a definitive answer but hopefully this gives you more of an idea about what it is important to think about and who you should approach if you want to take any formal advice on your retirement savings whilst working abroad.