Check the Tax Rules of the Country you Live In

We have become aware that some UK pension providers are writing to their customers who live outside the UK with information that could potentially be mis-interpreted.

It appears the UK press, and in turn the press of other countries, have latched onto this as well.  Very soon we predict there will be more and more coverage on the subject.  This could have implications when it comes to how you interpret a retirement projection and/or statement from your UK pension provider.

What if taking a lump sum is not tax free in the country you live in and the provider has written to you at your overseas address and you have acted on what the statement says?

Companies will generally have a disclaimer and will point you in the direction of a secondary document that states ‘you should check the rules in your country of residence’ but not everybody reads the small print.  Especially if it’s on page 11 of 20 and you don’t even know what you are looking for.

We believe that customer alerts on any document issued to someone living outside of the UK should be made more prominent when directing them to check the rules of their country of residence.  It is so simple in this day and age to have two versions of a document, one for UK residents and one for non-UK residents.  Additionally, any version for UK residents should warn that rules might change if you decide to live outside the UK.

Montfort’s view is that customers need this information upfront and that with such an approach fewer customers will make mistakes.

What should you do?  You might want to speak to a financial adviser about your experiences and whether you made the right decision.

What would happen if you had acted on the basis of what was included in the letter (assuming it was specifically addressed to you and you lived in perhaps France, Australia, New Zealand or some other country)? What are you going to think?

You probably are not an international tax specialist or retirement expert.  People we have spoken to have said they would believe their trusted retirement scheme provider and expect any lump sum to be tax free as the letter suggested. After all, the letter has been prepared for and addressed to them.

The issue is that taking a 25% Lump Sum is only tax free for UK residents.


What could this mean?

1. You could find yourself with undeclared tax liabilities in your country of residence. The whole 25% could be tax assessable.

2. What happens to your plans for that so-called tax free lump sum?

3. Perhaps you were told by your actual adviser it was tax free? What then – now you know they got it wrong?

4. What should you now say to your pension provider? Should they make changes?


Going forward

This is a complex subject. But not so complex that a pension provider could not make a warning more prominent:


 We note you live outside the UK. Any reference in this letter to taxation relates to a resident of the UK only.

 For example;

A lump sum paid from a UK pension scheme is only tax free for a UK resident. As you live outside the UK then the tax rules are not going to be the same as the UK.

 You should take specialist advice as to the tax consequences of drawing any monies from this scheme as a non-UK tax resident. We cannot be responsible for the accuracy of any statement given by an adviser regarding the tax rules of another country.

 Always check the overseas tax rules before proceeding to taking any monies from a UK scheme.


Watch out for more interesting articles from Montfort.

If you are at all concerned about the contents of this article, please contact Geraint Davies on +44 1483 202072 or by email to


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Montfort were incredibly helpful during our move to Spain. The team took the time to explain everything to ensure we could act quickly on their advice. I was really impressed with the end report which gave us clear guidelines on managing our pensions, income, residency and setting up bank accounts, everything! We would not hesitate to recommend Montfort again.

Ms S. Stienen-Durand Spain - 2016

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