‘Will my pension be stuck if I retire abroad?’

Once you become a non-UK taxpayer on moving abroad the rules change. You will only be able to receive tax relief on your personal contributions of up to £3,600 gross a year for five full tax years following the tax year you moved abroad. A word of warning: many pension providers do not accept personal contributions that aren’t eligible for tax relief, which will limit the amount of pension contributions you can continue to pay.

Retirement options

The earliest you can access your pension fund is usually age 55 (rising to age 57 from 2028) including the 25pc tax-free lump sum. There are three main ways you can usually access your pension; buying an annuity, moving your pension fund into drawdown, and taking lump sums directly from your pension fund.

However, pension providers must have the relevant regulatory permissions to conduct overseas business. If your pension contract allows you to select drawdown or buy an annuity with your current provider, this isn’t classed as new business so there shouldn’t be an issue.

But if, for whatever reason, you wanted to set up a drawdown contract or buy an annuity with a different provider, they may have to decline the business because they don’t have permission to conduct overseas business. If the drawdown or annuity options turns out not to be available to you, you may be able to simply take lump sums out of your pension fund.

Overseas pension transfer

If you are unable to transfer to another UK pension arrangement you may be able to transfer your pension to a qualifying overseas pension scheme known as a Qrops. You will need to seek financial advice to do this.

Paying pensions

Pensions can normally be paid to you wherever you live abroad. As you have a UK bank account, your pension provider should be able to make any payments directly into this. Alternatively, your pension provider may be able to make payments into your French bank account using the international payments system. French tax rates, the exchange rate and bank transaction costs will affect the amount of money you actually receive each time a payment is made.

Taxing benefits paid overseas

Most pensions paid in the UK are taxed in the same way as earned income which means that they are paid and taxed under the PAYE system. The pension provider will deduct tax from each payment using the individual’s tax code.

However, the situation is different when someone moves abroad and becomes a non-UK taxpayer. They may become liable for tax in the country they live in and could end up paying tax twice – when the UK pension provider processes the payment, and again on receipt in the country they live in.

France has a double tax treaty with the UK which means that the pension will be exempt from some or all of UK tax. However, your pension provider cannot unilaterally change how they tax your benefits.

You will have to contact HM Revenue and Customs and ask them to authorise your pension provider to change the basis on which payments are taxed. Be aware that although you can usually take 25pc of your UK pension fund as a tax-free lump sum, it may be taxable under French tax rules.

If the value of your benefits exceeds the lifetime allowance, currently £1,073,100 a tax charge will still be payable, regardless of where you live.

Reader Service: Wondering how much money you can send abroad? Learn how to make an international money transfer online