Some of you may be considering living abroad after retiring from the Armed Forces and may be worried about the impact of that decision on your pensions
In this article, written for the Spring issue of Easy Resettlement magazine, we explore the pension-related issues you need to consider.
Firstly, Armed Forces pensions are claimed and paid in the same way no matter where you live. Once your pension is in payment, you will receive a Life Certificate every two years. It is important that you deal with it straight away because, if the form is not returned in accordance with the instructions on the form, your pension will stop!
Armed Forces pensions are normally taxable and the default is that they are taxed in the UK, even if you are paying other tax abroad. If your pension is being taxed in UK, arm yourself with a copy of any Double Taxation Agreement which exists between the UK and the country in which you are going to live. These are easily found – simply search the internet for “double taxation agreement” plus the country concerned and you should find a link to the part of the government website on which they are held. Once you have it, make sure your accountant is aware of it and experienced at dealing with ex-pats, or you could still end up being taxed twice!
There are some places to which you can emigrate and choose to have your pension taxed under the local tax regime – eg. Nepal or the Channel Islands. There are others and information on this can be found on the HMRC website.
There are also countries where the default does not apply – eg. Australia and Canada. If you are going to live in such a country you will need to claim exemption from UK taxation in order to avoid double taxation. Check the position with regard to your chosen country of residence with HMRC to be certain about the prevailing tax regime. Wherever you are going to live, go armed with the latest information - and remember that tax rules do not remain static!
General information on taxation if you live abroad can be found at: https://www.gov.uk/tax-uk-income-live-abroad. Information on taxation in Canada is at: http://www.hmrc.gov.uk/cnr/canada-individual.pdf and on taxation in Australia is at: https://www.gov.uk/government/publications/australia-individual
Turning now to your State, or Old Age, Pension which is based on your National Insurance Contributions (NICs). Current State Pension rules require 35 years worth of contributions to achieve your maximum entitlement. Those with less than 10 years worth of contributions will have no entitlement. You will not have to pay NICs whilst living abroad but, if you do not, it is likely to affect your entitlement. Your options are:
- To pay voluntary NICs from the outset;
- Start to pay voluntary contributions once you are sure that you will remain abroad and, later, buy back up to six years’ worth of contributions to fill any gap which has occurred;
- Not to pay NICs and accept that you will receive only the proportion of the State Pension you have paid for rather than the whole.
Your State Pension will be paid to you gross (i.e. before tax) and you will have to declare it on your tax return. We recommend that, for the first year at least, you use a local tax accountant to help you submit your tax return. Getting the first year absolutely right and learning about the country’s tax regime from an expert will put you in good stead going forward.
Once in payment, the State Pension will not necessarily rise annually as it would in the UK. For example, in Canada it does not rise but in the USA it does. The arrangements for ex-pats living in EU countries post Brexit have yet to be established and, of course, we will keep members informed as to any changes that may arise. To learn more about NI and living abroad is available at https://www.gov.uk/national-insurance-if-you-go-abroad and, in light of the possible changes on the horizon, keep an eye out for information at https://www.gov.uk/state-pension .
Finally, a few contact details to keep handy.
If you need to contact Veterans UK, their Enquiry Centre is open 7am – 7pm Monday to Friday. Telephone 0800 085 3600 (from UK) or +44 141 224 3600 (from abroad). Email DBS-JPAC@dbspv.mod.uk .
If you need to contact Equiniti Paymaster about issues to do with pension payments, changes to your bank account details or queries about your P60, their Communications Centre is open 8am-6pm Monday to Friday. Telephone 0345 121 2514 (from UK) or +44 1903 768625. Fax +44 1293 604010. Email Veteransukpensions@equiniti.com - but they ask that you do not use email to notify them of changes in personal details. Reassuringly, they want to be sure that you are who you say you are before they make such changes – just ring them and have your Service Number and National Insurance Number handy.
You can read the Spring issue of Easy Resettlement here