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Can I contribute to a UK pension as an expat in Singapore?
British expats who have relocated to Singapore encounter limitations with how much and when they can contribute to their existing UK pension(s).
Expats in Singapore have fantastic opportunities for wealth creation and accumulation, but it is rare that employee benefits packages include formal pension/retirement contributions, which is common practice in the UK. In some cases, this benefit may come in the form of a cash allowance.
As a result, individuals are personally responsible to seek an alternative solution to ensure continuity in retirement planning whilst maximising their time overseas.
Are there alternative options?
Fortunately, Singapore has a favourable tax environment on an income and investment basis, and there are some fantastic planning opportunities for expats based here, particularly for those with one eye on a return to the UK in future.
As a British expat you do have access to investment vehicles which attract significant tax benefits and reliefs upon becoming UK tax resident, if set up whilst offshore.
But first… are you eligible to contribute to your UK pension as an expat?
If you satisfy the definition of a UK relevant individual, you can continue to pay into a UK pension after you have left the country.
A UK relevant individual is someone who was a UK resident in one of the previous five tax years and, at the time they were resident, became a member of a UK registered scheme1.
Upon leaving the UK to relocate overseas, the maximum tax-relievable contribution is 100% of the UK’s earnings in that tax year, or £3,600, whichever is greater1. For up to 5 UK tax years, you can still make member contributions, capped at this amount for tax relief. Contributions can only continue into an existing UK pension scheme.
What should I do with my existing UK Pension(s)?
Stay up to date, review it and regularly ask yourself a few questions:
- How is this invested? Is this fit for purpose and in line with my personal goals/objectives?
- How and when can I access my benefits?
- Is my asset allocation suitable for the current global market conditions?
- Does the asset allocation suit my overall risk appetite and net asset position?
- Do I receive suitable ongoing advice?
- What are the fees/charges I am paying on an ongoing basis?
- Should I look to consolidate my UK Pensions and tidy up my financial affairs?
- What are my options moving forward?
According to The Association of British Insurers (ABI), around £19.6 billion of old workplace pensions have been misplaced or forgotten about2. As such, you should review your pension regularly, particularly given the industry consolidation that has taken place across the industry in recent years.
The Pensions Regulator (TPR) reports the number of Defined Contribution schemes at 27,700 as of December 2021, and 45,501 in 2011 – that’s almost 40% consolidation in a decade3.
Next course of action
Moving forward a few actions can be taken to ensure you stay on track to reach your future retirement aspirations, whilst based in Singapore.
1. Undertake goals-based planning
Undertake goals-based planning to understand your desired retirement lifestyle, location, and respective income to fulfil these ambitions. You can think in today’s terms, then calculate the required retirement assets in future money terms.
Recognise any shortfalls and work towards plugging in these gaps with monthly or annual contributions, utilising a suitable investment vehicle and strategy based on your personal circumstances.
Where possible, automate your monthly contributions to benefit from dollar (pound) cost averaging.
2. Understand the available tax reliefs
As a British expat, it is important to consider how your investment is structured, and to factor in the tax efficiency depending on your plans in future. If you intend to repatriate back to the UK the structure of your investments can have a significant impact on how you are taxed.
To make full use of your available tax reliefs, ensure you receive suitable and personalised ongoing advice to avoid any surprises upon your return to the UK. Examples of tax benefits and reliefs available include Gross Roll Up, Time Apportionment Relief, Tax Deferred Withdrawals, Top Slicingand the ability to assign the investment to another individual without a UK tax charge4.
3. Review your retirement assets
Your retirement may be around the corner, or in the distant future. Regularly review your retirement assets to ensure they are invested appropriately considering current market conditions, your time horizon and risk appetite.
Make suitable informed changes over time, as the economic landscape is ever evolving. As you approach your retirement, alter your investment strategy and asset allocation to ensure this remains suitable for your circumstances.
You may wish to consider a form of ‘lifestyling’ which could involve lowering the risk profile and reducing potential volatility of your underlying investment. Consider your options of consolidating your UK pension assets, if beneficial to do so. This will keep your financial affairs tidy and prevent the potential of misplacing or losing track of your UK pension, which has been the case for the £19.6 billion, as estimated by the ABI2.
Being an expatriate in Asia has advantages and disadvantages that differ from person-to-person. It’s important to make sure you are aware of the financial implications and the benefits you can enjoy whilst residing offshore.
Take the first step by finding out how well you’re managing your finances and identify any gaps you need to fill so that you’re better protected. Visit here to speak to one of our Partners and to schedule an appointment.
Please note that the value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances. You are advised to seek independent tax advice from suitably qualified professionals before making any decision as to the tax implications of any investment.
1. HMRC Internal Manual, Pensions Tax Manual, HM Revenue & Customs. Updated August 2022
2. Lost pensions: what’s the scale and impact? Pensions Policy Institute, October 2018
3. Defined contribution pension market consolidation continues, The Pensions Regulator, January 2022
4. The UK Tax Benefits of an IIA for UK resident Individuals, St. James’s Place International, September 2019
About the Author
Alexander Celer is an Associate Partner who is passionate in building trusted long-term relationships with clients by delivering a tailored, personal service founded on the fundamentals of financial planning. He places great emphasis on helping clients construct solid financial foundations and through regular reviews, reposition portfolios as markets or personal circumstances change. Tax-efficient strategies are one of the many focus areas in his wealth planning process, particularly for clients with links to the UK, Europe and/or Australia. Reach out to Alex here.
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