Moving Abroad and Pensions

MrFund

Hi Everyone

I some basic questions about Pensions Schemes. I have a Personal Pension scheme. I don't contribute on a regular basis into the scheme (as my earnings can be quite lumpy) however, for this tax year I was fortunate enough to earn a fair amount of income (and I am being taxed at the top bracket).

Hypothetically, I can make a sizable contribution into my scheme before the end of the tax year. Here are my questions:

1. If I make a benefit into the the scheme, do I get tax relief on the amount I have contributed, and at what tax rate do I get that relief. Are there any restrictions around the relief (ie. if I earned >£150,000 and contribute £10,000 in cash into the fund, does that mean I would be able to reclaim £10,000 from the government on my tax return)?

2. What if I moved to another country before retirement and decided to retire in the country? How are my withdrawls from the pension fund taxed or treated?

Thanks!

jamesd

Basic rate tax relief is automatically added to your contribution by the pension company, often about a month after it receives the money. Higher and top rate needs to be claimed by a letter to HMRC or in your tax return. Hargreaves Lansdown describe the position for top rate tax payers this year, read what they say about it.

Next tax year you'll be limited to £50,000 of pension contributions. It's potentially even worth borrowing short term to maximise the benefit of this last chance to pay in much more.

I'm assuming that you're not close to the lifetime allowance and won't be before you take pension benefits. That's currently £1.5 million. If you think you'll be over that at some point in the future you should research the tax penalties that will apply.

How your pension income is treated abroad depends on the place. It can be anything from no tax to high tax and people often pick where to go based on the taxes. Cyprus, for example, has quite nice treatment. One of the options you have is to move a UK pension abroad, using something called a QROPS in the destination country. The QROPS doesn't have to be in the place where you live and there can be benefits in having the pension in a different place from where you live. Seek personal professional advice or start doing research now if there's a serious chance of you relocating abroad for retirement.