Pension Awareness Week UK 2025: What Every Expat Needs to Know
Pension Planning Tips UK
Pensions are one of the biggest assets most of us will ever own, yet they’re often the least understood. This week marks Pension Awareness Week UK 2025 — a reminder to step back, take stock, and make sure you’re not caught out by rule changes.
And if you’re an expat? Well, the complexity doubles. Different countries, different tax rules, and constant tinkering with UK pensions can make it feel like a minefield.
To help, here are five key pension planning tips UK expats should know right now.
1️⃣ State Pension age is rising
The UK State Pension age is currently 66. But this won’t last. Between 2026 and 2028, it will increase to 67.
So, if you were born after April 1960, you’ll need to wait that extra year. And further rises (to 68 or beyond) are already on the table for future generations.
For expats, the good news is that you can normally still claim your UK State Pension while living overseas, provided you’ve got enough qualifying National Insurance years.
That said, if you’ve got gaps in your record, now’s the time to check if voluntary contributions could make sense.
2️⃣ Pension inheritance rules are changing
At present, UK pensions are incredibly efficient when it comes to inheritance:
- If you die before 75, your pension can often pass to your beneficiaries tax-free.
- If you die after 75, your beneficiaries will pay income tax (at their own rate) on what they withdraw — but pensions don’t usually count towards Inheritance Tax.
From April 2027, these rules are changing. Pensions will no longer automatically sit outside of Inheritance Tax. The details are still being ironed out, but the direction of travel is clear: pensions will become less attractive as a pure inheritance vehicle.
For expats with sizeable pots, this could be a big deal. Estate planning should definitely be on your radar.
🔗 Are UK Pensions Now Liable for Inheritance Tax? The New Pension IHT Rules Unpacked
3️⃣ Pension access age is increasing
Right now, you can normally start drawing from a UK pension at 55, even if you’re still working.
From 2028, that “Normal Minimum Pension Age” will rise to 57.
That means:
- Anyone born after 5 April 1973 will be affected.
If you were planning to tap into your pension early, maybe to bridge a gap before other income kicks in, you’ll need to adjust your plans.
4️⃣ “Tax-free” lump sums aren’t always tax-free overseas
In the UK, most people can take 25% of their pension pot tax-free. This is known as the Pension Commencement Lump Sum (PCLS).
But if you’re living abroad, be careful:
- The UK won’t tax it, but your country of residence may.
- Many EU countries, for example, treat it as taxable income.
The result? A nasty surprise if you were banking on a tax-free payout. Always check the local tax treatment before drawing your lump sum abroad.
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5️⃣ You can still contribute while overseas – but only for 5 years
Leaving the UK doesn’t mean you can’t top up your pension.
- For the first five full tax years after moving overseas, you can still make contributions and receive UK tax relief.
- The standard allowance (if you have no UK earnings) is £3,600 gross per year.
- If you’re still earning UK income, you may be able to contribute more.
After those five years, the door largely closes unless you return to the UK.
Case Study: Steve and Fiona
Steve (62) and Fiona (57) have been expats for 15 years, living in China, where Steve is a senior executive at an engineering firm. They have two grown-up children, one completing a PhD, the other already working.
They’re now thinking ahead: Steve is considering stepping back from full-time work in the next few years, and the couple expect to return to the UK for 1–2 years before ultimately retiring to France.
Here’s their position:
- Pensions: Steve has three UK defined contribution pensions worth around £650,000. Fiona stopped contributing when they moved abroad, but has some smaller pensions.
- State Pension: Steve has kept up voluntary National Insurance contributions while overseas and will receive the full State Pension. Fiona has 17 years of contributions, well below the 35 needed for the full amount. Returning to the UK could give her the chance to work and/or top up her record before retiring.
- Access age: At 62 and 57, Steve and Fiona are already beyond the minimum age to access their pensions.
- Tax-free lump sum: If they take pensions while living in China or later in France, the 25% “tax-free” lump sum may be taxable locally. But if they draw it while back in the UK, they can benefit from the UK’s tax-free treatment — timing will matter.
- Inheritance planning: At the moment, their pensions sit outside of Inheritance Tax. From April 2027, this will change. Because they’ll still be UK resident for a period, they’ll need to factor in the impact of UK IHT rules before moving to France, where estate planning laws are also very different.
- Contributions: They left the UK over 15 years ago, so the 5-year expat contribution window has long passed. However, returning to the UK for 1–2 years will allow them to make pension contributions again — potentially a useful tool for sheltering income and topping up retirement savings before they move to France.
👉 For Steve and Fiona, the immediate priorities are:
- Reviewing when and where to take pension benefits, especially the tax-free lump sum.
- Considering voluntary NI contributions for Fiona to boost her State Pension.
- Preparing for the 2027 inheritance rule changes before relocating to France.
Aligning UK pension decisions with France’s very different tax and succession rules.
Frequently Asked Questions (FAQs)
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Can I claim my UK State Pension if I live abroad?
Yes, provided you have enough qualifying years. The UK State Pension can usually be paid overseas, but whether it rises with inflation depends on the country you live in. For example, it is uprated each year in the EU, but not in countries like Australia or Canada.
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How many years of National Insurance do I need for the full State Pension?
You need 35 qualifying years for the full new State Pension and at least 10 years for any pension at all.
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Can I make voluntary NICs from overseas?
Yes, often you can. Many expats keep paying either Class 2 or Class 3 contributions. It’s worth checking with HMRC which applies to you.
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If I return to the UK for a year or two, can I top up my pension?
Yes. Returning to the UK allows you to restart tax-relievable contributions, even if you’ve been abroad for more than 5 years. This can be useful for building up savings before moving on again.
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Is my UK pension taxed when I live abroad?
The UK usually doesn’t tax pensions paid overseas, but your country of residence may. Double taxation agreements can reduce the risk of being taxed twice, but the rules vary country by country.
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Will the rise in pension access age affect me?
If you were born after 5 April 1971, yes — you’ll need to wait until 57 to access most UK pensions.
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Are pensions still outside Inheritance Tax?
For now, yes. But from April 2027 pensions could be included in Inheritance Tax calculations, so it’s important to review your estate plans if you have significant pension wealth.
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Should I take my pension lump sum while I’m back in the UK, or wait until I move abroad?
This depends on your situation. In the UK, the 25% lump sum is normally tax-free. Abroad, it’s often taxed. If you know you’ll be leaving the UK soon, it may make sense to take benefits while still UK resident. Timing is key.
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What happens to my pension if I die before taking it?
Your beneficiaries can usually inherit it, often tax-free if you die before 75, or taxed at their income tax rate if after 75. These rules will change from April 2027, making pensions less favourable for inheritance.
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What are the best pension planning tips UK expats should follow?
Check your State Pension forecast, understand the tax treatment of lump sums in your country of residence, consider voluntary NICs if you have gaps, review your inheritance plans before 2027, and think carefully about when and where to draw your benefits.
💡 Final Thoughts
Pensions are complex, and as an expat you face an extra layer of rules and pitfalls.
Pension Awareness Week UK 2025 is a great chance to review where you stand — whether that’s checking your State Pension forecast, thinking about inheritance, or understanding how your lump sum will be taxed.
The key message? Don’t assume UK rules apply in the same way when you’re abroad.
Awareness is the first step, planning is the second.
Talk to an Expert
Ross is a qualified Chartered Financial Planner and Pension Transfer Specialist.
He has been a cross-border financial adviser for 25 years and specialises in helping British expats manage their finances with clarity and peace of mind.
If you would like to have a no strings chat with him, please get in touch.
