Working Overseas tax/pension confusion!

skaff

Hi everyone!

I am just coming to the end of a 22 year Army career and with it am entitled to my pension of c10K/annum. I have also been extremely lucky that i have been offered a job working overseas (oil industry) that pays well (40% tax bracket not including my army pension). The job has a contributory pension scheme too (matched by the employer up to 10% of salary). I will be out of the country for 6 months in every year but have had it pointed out to me that i will not qualify for seafarers allowance as oil ships do not count as 'ships'!

I want to start this job with my tax affairs in order rather than jiggle them afterwards and would appreciate a less naive eye than my own!! My thoughts are as follows:

1. As an employee of a foreign country i would not be taxed at source but will instead put in a Self Assessment form each year even though, as i am not self employed, i would not be able to claim expenses to offset my tax liability.

2. Any pension contributions i make i am entitled to a tax rebate for so would be best advised to put as much as possible into the pension scheme.

Beyond that i am stuck! Are those 2 assumptions correct? Also, what other considerations should i be thinking about. Thanks to anyone that can remove the veil for me!

atush

!, I don't know but we do have a tax forum. But I would def check that you are UK resident for tax purposes.

2, yes.

But do you have to take your Army pension? Or can you leave it to increase? If you have to take it as income, it will be taxed at 40% so I would put this income into the work or a PPension as well.

omits

You don't say if your employer is a UK company or if it is if they can advise you!

skaff

Hi and thanks for your help so far. Sorry i didn't make it clear before. The company in question is a US one.

As for the Army pension, i have to take it out straight away and it comes with a one off gratuity which can be increased if i commute more and draw less as a monthly pension which is my intention. As i have been fortunate with the job i have secured i can afford to put that pension into a new pension scheme although i am unsure how to achieve that in practice.

atush

that is likely to be a very bad decision (to commute pension into a higher LS) I would take the max pension available and just pay that income into a pension.

You can post the details and commutation rate if you like for others to check. But in general, FS pensions are best left to the max as they are index linked and provide free spousal benefits.

mania112

I think the Army pension can be deferred, worth checking because it sounds like you're not going to need that money at this time?

omits

Take the pension now and take max cash and upfront drawdown if possible. You NEVER know if the company managing your pension will have problems later or restrictions put on it by government. I.e. don't trust the money markets. Build up your own ISAs and tax free savings as you go to avoid crippling investment charges. Remember if you die then the pension to a spouse is much reduced and your pot goes into the fund.

Dragonista

skaff wrote: »

Hi everyone!

I am just coming to the end of a 22 year Army career and with it am entitled to my pension of c10K/annum. I have also been extremely lucky that i have been offered a job working overseas (oil industry) that pays well (40% tax bracket not including my army pension). The job has a contributory pension scheme too (matched by the employer up to 10% of salary). I will be out of the country for 6 months in every year but have had it pointed out to me that i will not qualify for seafarers allowance as oil ships do not count as 'ships'!

I want to start this job with my tax affairs in order rather than jiggle them afterwards and would appreciate a less naive eye than my own!! My thoughts are as follows:

1. As an employee of a foreign country i would not be taxed at source but will instead put in a Self Assessment form each year even though, as i am not self employed, i would not be able to claim expenses to offset my tax liability.

2. Any pension contributions i make i am entitled to a tax rebate for so would be best advised to put as much as possible into the pension scheme.

Beyond that i am stuck! Are those 2 assumptions correct? Also, what other considerations should i be thinking about. Thanks to anyone that can remove the veil for me!

So are you saying you will be local hire or UK hire? This may make a difference to tax liability. If you are local hire you may be liable for tax in the other country. Also what's will be your residency status? You say six months working away, if you are out of the country for 183+ (six months and half a day) you may not be a resident for tax purposes.

atush

omits wrote: »

Take the pension now and take max cash and upfront drawdown if possible. You NEVER know if the company managing your pension will have problems later or restrictions put on it by government. I.e. don't trust the money markets. Build up your own ISAs and tax free savings as you go to avoid crippling investment charges. Remember if you die then the pension to a spouse is much reduced and your pot goes into the fund.

Go back and re read. This is a Final Salary, not money purchase pension so you arguments don't apply.

In this case is better to A, defer if possible, B take max pension not commute.