Ask the Expert- Jonathan Law

I plan on moving abroad to work for the next five years. Am I able to continue to fund my UK pension during this time?

Moving abroad can be a big deal for many reasons but funding your pension while away is not normally high on people's worry list. That said, there are several issues to be mindful of when considering building up your UK pension provisions while living outside the UK.

Tax-relivable pension contributions into UK registered pension schemes are limited to (in a tax year), of the pensions Annual Allowance of £40,000 or your relevant UK earnings (whichever is lower). If by moving abroad you are no longer classed as a UK resident and your earnings are not taxed in the UK, then the level of your relevant UK earnings is zero.

If this is the case, then you are limited to contribute £3,600 gross (a payment of £2,880 net) into a UK pension in a tax year. Under current legislation, you can carry out this exercise for the five tax years after the one you left the UK in. After this point, no further contributions can be made.

On your return to the UK, legislation allows for you to utilise the pensions Carry Forward rules which (assuming you have enough relevant UK earnings) will allow you to top up your contributions from the previous three tax years to bolster your pension funding position.

Another factor to consider is, will you be paying national insurance contributions when you move abroad? If you will not, then your allocation to the UK state pension may be affected. This again can be rectified in later years, but thought is still required towards this.

With any move like this, it is important that you take the correct professional advice before you leave the UK to avoid the potential tax pitfalls that may arise with particular focus on the UK residency rules which can be easily triggered.

This article was originally published in the East Anglian Daily Times on Monday 7th November 2022.