Your UK Workplace Pension might be quietly losing value as you build your new life abroad. UK expats often overlook their pensions, which are their second most valuable asset after property, when they relocate to new countries.
Your workplace pension accounts stayed behind with little oversight after you relocated. These previous employment pensions can lose value by a lot, fall out of line with your financial goals, or lead to serious tax problems without regular checks. Many expats think moving overseas means HMRC can’t tax their UK pension anymore – but that’s not always true.
More than 4.5 million people think about moving abroad to work, which shows how many pension funds might be neglected. On top of that, transferring your UK plans to a non-Qualifying Recognized Overseas Pension Scheme (QROPS) could result in a huge 55% tax charge. Note that UK pensions will become part of your estate’s inheritance tax from April 6, 2027, which creates new challenges for expats’ financial planning.
Expat Wealth At Work will show you how to protect and make the most of your previous UK workplace pension. Your hard-earned funds should keep working for your future instead of shrinking through neglect.
Why expats forget their UK workplace pensions
Managing your UK pension gets way more challenging after moving abroad. Most expats don’t just abandon their retirement savings. These valuable assets can gradually diminish over time due to several predictable factors.
Lack of visibility after moving abroad
Life in a new country naturally weakens your connection to UK finances. Physical distance creates a psychological distance from your pension arrangements. This disconnect really matters because pension firms still send updates only to UK addresses. You might have no clue how your funds perform or even where they are.
British expats often find themselves without expert guidance on these matters. UK-based financial advisers won’t work with overseas clients because of regulatory restrictions. This leaves you in the dark about your pension options. Without proper financial advice, your pension sits there unmonitored and might underperform for years.
Most expats haven’t looked at their pensions since leaving the UK – sometimes for decades. This neglect happens right when overseas life brings new financial complexities that need more attention, not less.
Multiple pensions from previous employment
Your career in the UK probably left you with several pension schemes from different employers. Each one comes with its own rules, paperwork, and fees. Research shows scattered pension pots create real headaches:
- Administrative inefficiencies that get worse with distance
- Inconsistent investment strategies across different providers
- Exposure to excessive fees that eat into retirement savings
- Complicated withdrawal planning across jurisdictions
Managing this pension situation becomes particularly challenging for individuals living abroad. The Association of British Insurers says millions of pensions remain unclaimed. Expats run a higher risk of losing track of their retirement funds.
These forgotten pensions often hold substantial value. Each scheme holds a piece of your retirement security. Getting multiple statements throughout the year feels overwhelming. Questions about holdings, amounts, and withdrawal strategies become harder to answer.
No reminders or updates from providers
UK pension providers still use outdated systems that don’t work well for expats. Parliament recognises “inconsistencies in how support is delivered”. Better information sharing would solve many problems for expatriates.
Pension companies seem to forget about you once you leave the UK. Each year, your workplace pensions disappear from your memory without any updates or reminders. Many providers haven’t updated their services to help customers who live around the world.
Pension transfers take time and can get pricey. Some advisers charge up to 5% for their transfer services, which significantly reduces the value of your pension. Many expats stick with what they have because it’s too complex to change. Their pensions drift along without any real oversight.
The government knows this is an issue. They say, “British citizens need to know the implication of any move abroad so that they can plan.” Notwithstanding that, you as an expat must stay informed —it’s a tough job without proper systems to keep you connected to your UK pension affairs.
The real cost of ignoring your pension
Your UK workplace pension could take a big financial hit if you leave it unattended. The damage adds up over time. Active investments adapt to market changes, but forgotten pensions stay still and chip away at your retirement money in several ways.
Outdated investment strategies
The UK pension market cares too much about costs instead of value, which hurts savers in the long run. This obsession with costs stops investment in assets that could bring better long-term returns, even if they cost more upfront.
The situation grows worse for expats. Most workplace pension schemes switch to “lifestyling” strategies as retirement gets closer. They move your money from growth investments to safer, lower-risk options. These default plans work best for UK residents who want to buy an annuity, not expats with different retirement plans.
Your pension keeps following these automatic strategies whatever your location. It might switch to low-growth investments at the worst possible time for your international situation. Without your input, the pension follows a preset path that could work against your actual retirement plans abroad.
Losses from inflation and low-growth assets
Inflation silently eats away at your pension’s buying power. New research shows many retirees still don’t plan enough for inflation, even after seeing prices go up firsthand.
The numbers tell a clear story:
- A £100,000 pension giving £5,000 yearly income would last 37 years without inflation
- Just 5% average inflation would make the same money run out 19 years earlier
- UK DC pension savers now expect returns 2-2.5 percentage points lower than previous pension commissions thought
Small percentage differences create giant effects over your retirement years. A 66-year-old man today will likely live another 19 years, and 13% make it to 95. Women at 66 typically live 21 more years, with 20% reaching 95. Over these timeframes, even modest inflation can destroy your buying power.
Many retirees develop an “inflation blind spot” in retirement planning; the phenomenon also affects expats with dormant UK pensions. This oversight becomes dangerous during economic uncertainty or when living in countries with different inflation rates than the UK.
Missed tax planning opportunities
Expats face tax challenges that UK residents don’t. Poor planning could mean paying tax twice – in the UK and where you live. This double taxation takes a big chunk out of your retirement income.
Currency fluctuations pose another big risk. A weaker pound against your local currency can cut your pension’s real value and reduce your spending power abroad. Exchange rates can change a lot over retirement years. Not having the right plans leaves you financially exposed.
New inheritance tax rules coming in 2027 will include UK pensions in your estate calculations. Without planning ahead, your loved ones might face surprise tax bills on money you wanted them to have.
The cost of ignoring your UK pension goes way beyond poor investment returns. It covers tax problems, currency risks, and inflation threats that together reduce your retirement savings.
How default pension strategies can hurt your returns
UK pension holders rarely know how their Previous UK Workplace Pension changes automatically as they approach retirement. These changes happen silently without your input and can hurt your retirement goals, especially when you’re an expat.
What is a lifestyling strategy?
Lifestyling works as an automatic investment approach that moves your pension savings from growth-focused investments to what they call “safer” options as you get closer to retirement. This process usually starts between six and ten years before your chosen or default retirement date. Your pension provider makes these changes automatically unless you tell them not to.
Here’s what a standard lifestyling strategy looks like:
10 years before retirement: 100% in growth assets (stocks)
5 years before retirement: 50% in growth assets, 50% in bonds
At retirement: Only 0-25% in growth assets, 75-100% in bonds/cash
Lifestyling wants to protect your pension value from market ups and downs as retirement nears. This sounds appealing at first, but it assumes you’ll follow a typical UK retirement path—usually buying an annuity or taking a tax-free lump sum followed by regular income.
Why it may not suit expats
Default strategies often don’t match what expats need for their international retirement plans. Lifestyling happens based on your original retirement age and whatever changes you’ve made since moving abroad. When you relocate and work longer than planned, your pension might switch to conservative investments too early.
About 90% of pension scheme members stick with their default investment strategy. Most expats never choose a different approach, even after their lives change when they leave the UK.
The 2015 Pension Freedoms made lifestyling more challenging. Before these changes, most retirees bought annuities, so conservative pre-retirement investments made sense. Now people prefer flexible withdrawals while staying invested—a strategy that needs continued exposure to growth.
Retirement can last 20–40 years now, making low-risk funds a disastrous choice for such long periods. Your Previous UK Workplace Pension might not generate enough returns to support decades of retirement abroad when it automatically moves to conservative investments.
Case study: low-risk investments gone wrong
Studies comparing different investment approaches show concerning results for people who follow default lifestyling strategies. Pension investors who chose the “Do It For Me” approach with automatic lifestyling got much worse results than those who picked a “Do It Myself” approach that focused on equity investments.
Lifestyling may rob you of the gains of investing in the first place, even as it reduces your volatility before retirement.
What should worry you the most? Lifestyling might double your “risk of ruin”—the chance of running out of retirement savings—compared to keeping a globally diversified equity portfolio. The “safer” approach creates bigger long-term risks for your retirement security.
Lifestyling is generally rubbish, and if investors only knew the reality, they wouldn’t opt for it. It is quick and easy to sell to uneducated investors, and we are sure that’s the only reason it is so prevalent.
You can opt out of lifestyling strategies by contacting your pension provider directly. This simple step could be one of your most important financial decisions as an expat, given how it affects your long-term returns.
Understanding your pension tax exposure abroad
Tax complications often catch many expats with a previous UK Workplace Pension off guard. They find out too late that moving abroad doesn’t free them from UK tax obligations. This situation could lead to double taxation in their new home country.
UK income tax on overseas withdrawals
Your Previous UK Workplace Pension must follow UK tax rules even after you move abroad. UK tax jurisdiction applies to payments you receive from a UK pension provider. Your pension income remains taxable in Britain if HMRC still sees you as a UK resident for tax purposes, even though you live overseas.
This situation creates a significant issue for most expats, as their workplace pension benefits from the UK may be subject to taxation in both countries simultaneously. You could end up paying tax twice on the same income unless specific international agreements protect you.
Each type of pension faces different tax treatment. The UK State Pension doesn’t count as a government pension for tax purposes and might fall under different rules in international agreements. UK government service pensions, which include some teaching and police pensions, usually stay taxable in the UK whatever country you live in.
Double taxation agreements explained
Double Taxation Agreements (DTAs) serve to avoid taxing the same income twice. The UK has DTAs with more than 130 countries worldwide. These agreements create a network of international tax rules that decide where your pension gets taxed.
Each agreement has its own framework, but most follow these principles:
- They decide which country can tax pension income first
- They spell out available tax credits
- They define how different pensions get treated
These agreements usually give taxing rights to either your home country or the country where the pension comes from (the “source country”). Many DTAs say that pensions paid for past employment should only be taxed in your country of residence.
Government pensions differ from regular private pensions. Under many agreements, government pensions stay taxable in the UK unless you’re both a resident and national of your new country.
How to avoid paying tax twice
You need to take specific steps to avoid paying tax in both places. Tell HMRC right away when you move abroad. This vital first step begins the process of establishing your correct tax status.
Check if your new home country has a DTA with the UK. If it does, look at what it says about pension income. The agreement might let you apply for:
- Partial or full relief before tax
- A refund after you’ve paid tax
You’ll need the right form to claim relief based on where you live. Special country forms exist for Australia, Canada, France, Germany, Spain and the USA. Other countries use HMRC’s standard claim form.
Send your completed form to your local tax authority. They’ll check if you qualify and either send it to HMRC or return it for you to forward.
Tax-free places like the UAE need extra steps. You must prove you meet local residency rules – usually by staying there 183 days a year and making it your main home. The right paperwork could let your previous workplace pension arrive without UK tax taken out.
If both countries still tax your pension despite a DTA, you can claim foreign tax credit relief through your UK tax return to reduce this burden. You’ll usually pay whichever country’s tax rate is higher.
Should you transfer your pension overseas?
Many expats look at transferring their Previous UK Workplace Pension to an overseas scheme. Retirement planning becomes more complicated when you cross borders, and knowing your transfer options is vital to get the most from your pension.
What is an International SIPP?
An International SIPP (Self-Invested Personal Pension) works as a UK-based pension scheme made especially for expats and non-UK residents. These special plans let you manage your retirement investments anywhere in the world, unlike traditional workplace pensions.
International SIPPs follow UK regulations but come with features that global citizens need. They share the same simple structure as domestic SIPPs but give you more flexibility once you’ve left British shores. These plans stay under UK Financial Conduct Authority oversight, which means you get regulatory protection just like standard UK pensions.
Benefits of transferring for expats
Transferring your Previous UK Workplace Pension to an International SIPP offers several advantages:
- Investment flexibility – You get more investment choices, including individual shares, ETFs, bonds, and funds that match your retirement goals
- Currency management – You can hold and invest in multiple currencies to alleviate exchange rate risks while living abroad
- Regulatory protection – You keep your UK Financial Services Compensation Scheme coverage outside the UK
- Consolidation opportunities – You can bring multiple UK pension pots together into one easy-to-manage solution
- Tax-efficient drawdown – You might pay less tax based on where you live and applicable double taxation treaties
International SIPPs let you invest your money across Exchange Traded Funds, Investment Trusts, and Unit Trusts in different currencies. This flexibility helps expats who move between countries.
Risks and costs to think over
Pension transfers need careful thought. The 25% Overseas Transfer Charge applies unless you and your new scheme are in the same country. This tax could take a big chunk out of your pension.
You might lose valuable benefits from your original scheme. Many workplace pensions give you advantages like guaranteed annuity rates, life insurance, and death benefits that you’ll lose after transfer. Once you leave a defined benefit scheme, there’s no going back.
Your transfer will likely include these fees:
- Exit fees from your current provider
- Administration fees for the transfer
- Management fees from your new pension scheme
- Transaction fees on investments and withdrawals
Currency changes matter too. Moving to a scheme in a different currency means exchange rates could affect your pension’s value as time goes by.
Non-UK residents usually can’t get UK tax relief on new payments to International SIPPs. Without proper planning, your tax bill might be higher than you predicted, especially if your new country’s tax regulations aren’t favourable.
Your decision to choose an International SIPP depends on your retirement timeline, where you plan to live, and your money goals. A pension move might not work well if you return to the UK, have smaller pension amounts, or haven’t settled on long-term living plans.
New inheritance tax rules and what they mean for you
UK expats should prepare for a significant tax change that will impact their previous UK workplace pensions beginning in April 2027. This change marks one of the biggest shifts in UK pension taxation we’ve seen in recent years. It will greatly impact how you plan your cross-border estate.
Upcoming changes in 2027
The UK government plans to include most unused pension funds and death benefits in Inheritance Tax (IHT) from April 6, 2027. Currently, pensions stay outside your estate’s inheritance tax calculations. This flexibility makes them powerful tools to transfer wealth. But this benefit will end soon. Your unspent pension savings will count toward your estate’s IHT liability.
The government wants people to use pension tax relief for retirement rather than passing on tax-free wealth. Their numbers show about 10,500 estates will now have to pay inheritance tax when they didn’t before. On top of that, 38,500 estates will pay more tax than they do now. The average increase will be around £34,000.
How pensions will be included in your estate
Your executor will need to report and pay any inheritance tax due on your pension, not the pension provider. This is different from earlier plans that would have made pension administrators handle this task.
Some exceptions will still apply:
- Death in service benefits from registered pension schemes will stay outside IHT scope
- Dependant’s scheme pensions from defined benefit arrangements will be excluded
- Existing exemptions for pension benefits passing to a surviving spouse or registered charities will continue
Pension scheme administrators must tell executors the pension’s value within four weeks after a death is reported. The executors will add this amount to calculate the total estate value for inheritance tax.
Planning for cross-border inheritance
These changes make things more complex for expats. Your worldwide estate might still face UK inheritance tax if you keep UK domicile status. You could be “deemed domiciled” for UK tax even after living abroad if you’ve been a UK resident for 15 of the last 20 years.
Timing matters a lot here. Your beneficiaries might share responsibility for any unpaid IHT on inherited pension funds. In some cases, combined inheritance and income taxes could reach 80%. This leaves much less for your beneficiaries.
Current rules (before April 2027) keep overseas pensions like QNUPS free from UK IHT. After the changes, UK-domiciled individuals will see these pensions treated like UK ones when they pass away. But if you’re genuinely non-domiciled, your overseas pensions might stay outside UK inheritance tax, depending on your case.
Expats with UK pension assets should review their pension structure and inheritance plans with cross-border experts soon. These changes are coming fast, and you’ll need to be ready.
How to review and optimize your pension today
Your UK workplace pension needs a smart plan and the right tools to secure your financial future. A proper review of your pension today can save you thousands by avoiding poor investments and high fees.
Using cash flow modeling
Cashflow modelling helps you see exactly where your pension assets stand compared to what you’ll need later. This tailored financial forecasting shows you how long your money might last after you retire. Detailed projections of your income, expenses, and investment growth give you a clear picture of whether your current pension will help you meet your retirement goals.
Good cash flow modelling looks at:
- How inflation will affect your buying power
- How investments might perform in different situations
- Your spending habits during different retirement phases
This works really well to test different scenarios that expats face, like currency changes or moving between countries.
Making your investments match your goals
A clear picture of your cash flow needs makes it easier to review your investment strategy. The surprising fact is that 90% of pension scheme members stick with default investment strategies that might not match their goals. Your UK workplace pension should match your life now—not your old UK situation.
The right strategy should consider the following factors:
- Your actual retirement timeline (not your old UK plan)
- How much investment risk you can handle now (which might be different from UK standards)
- What income you’ll need in retirement (including exchange rates if you’re using another currency)
Finding hidden fees and exit penalties
The shocking truth is that 83% of UK pension savers don’t know what they’re paying in fees. Research shows that 55% of people have expensive pensions with charges above 1% each year. A well-managed pension shouldn’t cost more than 0.34% in yearly provider charges.
Pensions that started before March 31, 2017, now have exit penalties capped at 1% of your fund value if you transfer. Exit charges might still apply if you’re under 55. Even more concerning is that nearly 60% of assets in older schemes face exit fees of 10% or more.
We’re ready to help if you’re unsure about your UK pension, want to know about transfers, need to explore options, or just want another perspective. No pressure, no strings attached. Let’s have an honest chat about your future.
A few small changes to your fee structure can make a huge difference. With a £200,000 pension pot, better fees could save you more than £3,000 every year.
What to check before making a pension transfer
It is crucial to carefully evaluate your previous UK workplace pension transfers before making a decision. Making rushed decisions could lead to lost benefits and extra fees.
Loss of guaranteed benefits
Safeguarded benefits give you extra security and valuable guarantees that you can’t get back after a transfer. These include Guaranteed Annuity Rates (GARs) and Guaranteed Minimum Pensions (GMPs) from pre-1997 employment. UK law requires you to get independent financial advice before transferring if your pension’s safeguarded benefits exceed £30,000.
Exit fees and transfer penalties
You might face exit charges when transferring your pension. The good news is these charges are now capped at 1% of your pension value for those over 55. Pensions that started after March 31, 2017 have no exit fees at all. Market Value Reductions might also affect you if you withdraw from with-profits funds during market downturns.
Checklist for reviewing your current plan
Take time to check:
- All guaranteed benefits and their values
- Potential exit fees or penalties
- Your employer’s contribution status
- Risk of losing protected tax-free cash above 25% or a protected retirement age
- The new pension’s investment options and fee structure
We’re ready to help if you have questions about your UK pension or need guidance about transfers. Let’s have an open, honest chat about your options and future plans – no pressure, no strings attached.
Conclusion
Your financial future as an expat depends on how well you manage your Previous UK Workplace Pension. Neglected pensions can quietly lose value through outdated investment strategies and inflation. You miss out on tax planning opportunities. Most expats let these valuable assets drift without proper oversight, which could cost them thousands in retirement income.
Your pension is likely one of your biggest financial assets, right after property ownership. Taking control now will improve your retirement outcomes dramatically. Take a good look at your current pension arrangements. This includes any lifestyling strategies that might automatically move your investments toward lower-growth assets at the wrong time for your expat situation.
Understanding your cross-border tax exposure clearly helps you prevent double taxation. Double Taxation Agreements between the UK and your country of residence protect you, but you need proper documentation and planning to make use of them.
The 2027 inheritance tax changes need your attention now. These changes mean your unused pension funds will fall under inheritance tax rules and could create big tax bills for your beneficiaries. You’ll get better results if you plan and restructure your affairs before these changes take effect.
Your pension shouldn’t just sit there. Think about whether consolidation or moving to an International SIPP would better fit your expat lifestyle. These specialised options give you more investment flexibility, currency management choices, and possibly better tax treatment depending on where you live.
Before you decide to transfer, review any guaranteed benefits you might lose, exit fees, and whether your current plan still works for you. Even small differences in fees can affect your long-term retirement substantially.
Your Previous UK Workplace Pension deserves as much attention as any major investment. With good information and professional guidance, you can turn these forgotten funds into powerful assets that support your international lifestyle for years to come.