If you have a UK Pension but have now left the UK permanently, you may be wondering how you can withdraw your money from your pension fund.
Once you leave the UK, your pension will still be subject to the UK legislation and tax rules. This is not to say that you will always pay tax on your pension in the UK, but there are just certain rules surrounding how you can withdraw the money from your pension.
If you have a defined contribution pension, where you have built up a pot of money through yours and your employer’s contributions, then you will be able to access this from age 55.
If you have a defined benefit (final salary) pension, which provides you with a fixed income throughout retirement, you wont be able to access this until the normal scheme retirement age which is usually 65. You may be able to access it earlier although you will be given a reduced pension.
Alternatively you can transfer your defined benefit pension to a defined contribution pension, such as a SIPP, and then you would have access to all of your money from age 55.
If you have reached the age of 55, and want to make a withdraw from your pension fund, you will need to contact your existing pension provider and request the pension payment forms.
We have listed below the various ways in which you can withdraw your money from a Self Invested Personal Pension (SIPP). Not all pension funds will allow these flexible withdrawals.
Withdraw the whole fund in one payment
In April 2015 the UK Government introduced new legislation, now known as ‘Pension Freedoms’, which removed the compulsory requirement to purchase an annuity or income drawdown product with a pension fund.
This meant that people could now withdraw their whole pension fund in one go. In line with UK pension tax Law, 25% of this would be paid tax free, with the remainder treated as income and subject to tax. This could mean you are left with a large tax bill if you withdraw the whole fund.
Multiple lump sum withdrawals
Instead of drawing your whole pension in one lump sum, you can take multiple lump sums whilst your pension remains invested. This is know as an Uncrystallised Fund Pension Lump Sum (UFPLS). 25% of the withdrawal would be tax free, with the other 75% subject to tax.
You can take multiple lump sums, as and when required, until your pension fund runs out.
Withdraw the tax free lump sum only
It is possible to withdraw the 25% tax free lump sum only, with the remainder left invested in your SIPP. You do not have to take the full 25% in one payment, you could take smaller percentages until these all added up to 25%.
Once you have taken all of the tax free lump sum available, any further withdrawals from your pension would be treated as income and subject to tax.
Regular income withdrawals
If you want to use your pension fund for its intended purpose, ie. to provide you with an income in retirement, then perhaps this would be the most suitable option. Your pension will remain invested while you draw a regular income from the SIPP.
Most people withdraw the 25% tax free lump sum and then set up a monthly income payment, although there is no requirement to take the full tax free lump sum.
You are in control and can set the level of income you wish to take, this can be either a fixed amount, or a percentage of your fund.
You will need to ensure that the level of income that you take is sustainable so that you do not deplete your SIPP too early and have no money left for the rest of retirement. Studies have shown that an income rate of around 4% should be able to sustainable throughout retirement.
If you are resident overseas when you make the withdrawal, then you will likely have to pay tax on withdrawals in your country of residence. The UK has double taxation agreements with over 100 countries to avoid the scenario of being taxed twice on your pension withdrawals.
If you transfer your pension(s) into our SIPP, we have a team of pension experts on hand who can talk you through the options for drawing your pension from overseas, and assist with claiming the double taxation relief on your withdrawals to minimise the tax you will pay.
The SIPP is free to set up with low ongoing fees and ready-made investment portfolios so you don’t need to be an expert to invest. We can also pay your pension into your local bank account, we don’t require a UK bank account.
Speak to us about transferring your pension.