Ever since the very earliest days of Forces Pension Society, members have been considering whether or not to retire abroad. Considerations continue to change, but moving abroad can pose significant challenges. This article does not pretend to provide all the answers, but does highlight the main questions the Society is regularly asked.
ARMED FORCES PENSIONS
Q: Can I still claim my Armed Forces pension if I go and live abroad?
A: Yes of course. 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 three years. It is important that you deal with it straight away because, if the form is not returned in accordance with the instructions, your pension will stop!
Q: What about Early Departure Payments under AFPS 05 or 15?
A: As above. These are an entitlement and are not affected by where you live.
Q: What about tax? Must I pay it and can I escape it if I live abroad?
A: Armed Forces pensions are normally taxable and the default is that it is 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!
Q: Are there exceptions to this rule? Is there anywhere that taxes on Armed forces pensions are paid locally?
A: Yes, but this can change, so make sure your information is up to date. At the moment some countries and dependencies offer a choice – Southern Cyprus or the Channel Islands are examples (although the choice in Cyprus ceases in Dec 2024). There are others and information on this can be found on the HMRC website. Simply google ‘double taxation treaties’. There are also countries where the default does not apply and no option exists – eg. Canada. Check the position with regard to your chosen country of residence with HMRC to be certain about the prevailing tax regime. 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 www.gov.uk/tax-uk-income-live-abroad
Q: How are War Pensions / Armed Forces Compensation Scheme payments affected by living abroad?
A: These are not taxable in UK, so no real issues if your UK income is taxed at source – it is simply ignored. But if you have elected to be taxed abroad, it may depend on the country you are in as to whether they decide to ignore it.
Q: Can I transfer my pension to a foreign Army if I decide to emigrate and transfer to the Australian Army, for example?
A: No. The option to transfer a Public Sector pension abroad was removed by the Chancellor in his 2014 Budget.
Q: Will I have to pay for medical treatment if I live abroad?
A: That entirely depends on where you live and you need to check locally. The future arrangements for Brits living in Europe are unclear at the moment, for obvious reasons. But note that the European Health Insurance Card – even if it remains valid post Brexit is only intended to cover you for treatment at public expense on temporary visits to another country, It’s not a reliable alternative to travel insurance or health insurance, as in some countries you are expected to pay a proportion of your costs in any event.
Q What is the difference between residency and domicile?
A: Whether you are deemed to be resident or domiciled in a particular country can profoundly affect your tax affairs, so take advice from a local qualified tax expert. In broad terms residency is more likely to affect your income tax liability, whilst domicile is more likely to affect your Capital Gains Tax and Inheritance Tax liability. From HMRC perspective, if you are present for 183 days or more in a country in a given tax year, you are considered resident there for tax purposes. In addition if you work abroad for more than a year you must not normally return to the UK for more than 91 days in any 365 day period. Domicile is linked to where you come from originally – the place you have a substantial connection with. But it is not as simple as that as it is possible to change your domicile subject to meeting certain criteria – moving permanently abroad and providing evidence to that effect (domicile of choice) and there is also the concept of deemed domicile which is where HMRC treats you as being domiciled. Enough said. Don’t guess at what suits you best – because you are not the one who applies the rules.
Q: Should I make a separate will if I live abroad?
A: Each nation has its own laws determining how an estate is dealt with after death. There is no law that applies in all cases, so if you are an expat and own assets in more than one country then you may require more than one will – especially if you own property abroad. Check with a local expert to ensure your estate will be distributed according to your wishes.
Q: Do I need to register with the British High Commission / Embassy if I live abroad?
A: No, this used to be encouraged but since take up was very low the system has been discontinued. However, it is worth noting the contact details of the British Consulate/Embassy in case of mishap.
UK STATE PENSION
Q: Must I contribute if living abroad?
A: Your pension is based on your National Insurance (NI) contributions. Unless in government service, you do not have to contribute whilst living abroad but if you do not, it may affect your eligibility. Choices are:
- Continue to pay voluntary NI contributions;
- Start to pay voluntary contributions when you are sure that you will remain abroad and, later, buy back up to six years’ worth of contributions to fill any gaps;
- Pay nothing and accept any reductions in pension as a result.
Your State pension will be paid to you gross (i.e. before tax) and you will have to declare it on your tax return.
Q: What UK State pension will I be paid once I am pensionable?
A: 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. This is a big bone of contention, but I tell it as it is. More on the government website at www.gov.uk/national-insurance-if-you-go-abroad.
Q: Should I rely on foreign bank accounts or keep one in UK?
A: Having all your money in an overseas bank account is limiting if strict withdrawal limits are imposed and, for those with savings, you risk a ‘haircut’ in times of crisis. Holding back pension payment in the UK in difficult times is fine if you have sufficient funds to keep you going. BUT keeping a UK bank account ticking over is a safe option – so long as your bank will let you; different banks have different rules about expat accounts. Useful numbers to keep handy should you need to change to the way that your pension is paid are:
- for War Pensions/AFCS: 0808 1914218 (from UK) or +44 1253 866 043 (from abroad)
- for AFPS: 0345 121 2514 (from UK) or +44 1903 768625 (from abroad)
Q: Am I allowed to vote when abroad?
A: If you are serving abroad you can register to vote using the armed forces registration service. If you emigrate you can still vote in UK,if:
- you’re a British or eligible Irish citizen
- you were registered to vote in the UK within the previous 15 years (or if you were too young to have registered when you left the UK)
The current government undertook to extend voting rights for expats beyond 15 years, but the enabling legislation has not yet been passed.
Q: If I marry abroad will it be recognised in the UK?
A: If you’re a British national getting a marriage or civil partnership abroad, your marriage or civil partnership will be recognised in the UK if you followed the correct process in the country where you got married and it would be allowed under UK law (you have not married a minor or an elephant). Some countries require a certificate of no impediment from the British authorities before a foreign marriage can go ahead (to show you are not already married). There is a helpful government website www.gov.uk/marriage-abroad
REGISTERING BIRTHS AND DEATHS
You must register your child’s birth according to the regulations in the country where the child was born. They’ll give you a local birth certificate. This local birth certificate should be accepted in the UK, eg when you apply for a passport or register with a school or doctor, but you might need to have it translated and certified if it isn’t in English. Once you’ve registered locally you should also be able to register the birth with the UK authorities and it would be sensible to do so.
If a British citizen dies abroad, local procedures must be followed and a death certificate obtained from the relevant authorities in the country concerned. The General Register Office (GRO) in the UK is not automatically notified or sent a copy of the certificate.
It is also usually possible to register the death with the local British authorities overseas, via the nearest British Consulate. This means that a record of the death will be sent to the GRO within 12 months, allowing further death certificates to be provided by the GRO to the family in the UK. However in a few countries it is not possible to register with the British authorities because death certificates from these countries are accepted in the UK for probate and other purposes. Again, the government website is helpful www.gov.uk/register-a-death
Q: Do you have any tips on housing, acclimatising, running a business, making friends, meeting people.
A: Way beyond our scope. But do seek local advice from others who have already taken the plunge so as to understand the pitfalls and from local experts to understand the rules.