Pension Planning for Non-UK Nationals Working in the UK

The UK pension system makes no distinction between British nationals and citizens of other countries when it comes to workplace pension rights. A non-UK national who works in the UK, earns above the auto-enrolment threshold, and is aged between 22 and 66 will be automatically enrolled in a workplace pension — and will accumulate pension rights that may be worth substantial sums over a UK career.

The challenge comes later: when the non-UK worker leaves the UK, what should they do with the pension? The options — leaving it deferred, transferring it overseas, accessing it from abroad — each carry different tax and regulatory implications. For US citizens in particular, the UK pension creates compliance obligations that span two complex tax regimes.

This guide explains the auto-enrolment position, the options on leaving, the state pension question, and the specific issues that arise for certain nationalities.

Important: This guide is for general educational purposes only. The interaction between UK pension rules and overseas tax regimes is highly complex and jurisdiction-specific. You should seek advice from a qualified adviser with expertise in both UK pension law and the relevant overseas jurisdiction before making any decisions about your UK pension.

---

Auto-Enrolment: Does It Apply to Non-UK Nationals?

UK auto-enrolment law applies to workers who are "working or ordinarily working in the UK" under a contract of employment. The test is not about nationality or immigration status — it is about whether the individual is genuinely employed in the UK.

Workers who are typically subject to auto-enrolment:

• EU, EEA, and other non-UK nationals employed on a UK employment contract
• Those on intracompany transfers from an overseas employer who are integrated into the UK workforce (working under UK management, operating from UK premises, completing UK-directed work)
• Those on UK work visas (skilled worker, global talent, intracompany transfer visa holders, etc.)

Workers who may be exempt or outside the scope:

• Short-term business visitors (typically those in the UK for less than three months on a genuine business trip rather than employment)
• Those on secondment from an overseas employer who remain entirely under overseas employment terms (not common in practice)
• Workers covered by certain social security exemption arrangements

If you are employed in the UK and paying PAYE income tax and NI contributions, auto-enrolment almost certainly applies to you. Your employer must enrol you automatically when you reach the qualifying age (22) and the qualifying earnings threshold (£10,000 per year), unless you are already in a qualifying pension scheme.

---

Contributions and Tax Relief for Non-UK Nationals

Once enrolled, a non-UK national contributes to the UK pension scheme on the same terms as a UK national:

• Contributions attract UK income tax relief (because the contributions are made from UK-taxed earnings)
• The employer must contribute at the minimum rate (3% of qualifying earnings, or higher under the scheme rules)
• The pension grows free of UK income tax and capital gains tax
• Total contributions (employee + employer + personal) count towards the annual allowance (£60,000 for 2026/27)

There is no restriction on non-UK nationals accumulating UK pension rights. The rules are the same regardless of nationality.

---

What Happens to the UK Pension When You Leave?

This is where planning decisions become important. A non-UK national who has worked in the UK for, say, five years might have a workplace pension worth £40,000-100,000 or more by the time they leave. The options:

Option 1: Leave It as a Deferred Pension

The pension can simply be left in the UK scheme as a deferred pot. The money remains invested and continues to grow (or fall) in value. You access it when you reach the UK minimum pension age (currently 55, rising to 57 in 2028).

If you retire in another country, you can still access the UK pension from abroad. The pension provider will need proof of your identity and bank account details for the receiving payment. Most providers can pay to overseas bank accounts, though currency conversion charges may apply.

Tax on the UK pension when drawn from abroad depends on the double taxation agreement (DTA) between the UK and your country of residence. In some DTAs, pension income is taxable only in the country of residence (not the UK). In others, the UK retains the right to withhold UK income tax. You will need to either apply for an NT coding (if the DTA gives exclusive taxing rights to your country of residence) or accept UK PAYE withholding and offset it against your local tax liability.

Option 2: Transfer to a QROPS

If you move to a country that has a Qualifying Recognised Overseas Pension Scheme (QROPS), you can transfer your UK pension to the QROPS — moving the pension into the pension system of your new country of residence.

The QROPS transfer has the following characteristics:

• No Overseas Transfer Charge (OTC) only where you are resident in the same country as the QROPS (the same-country-residence exemption). The previous exemption for transfers to a QROPS based in the EEA or Gibraltar was abolished from 30 October 2024 — moving to or transferring within the EEA no longer avoids the charge by itself
• 25% Overseas Transfer Charge applies where the QROPS and your country of residence are in different jurisdictions (and neither is the UK), or if within five complete tax years of the transfer your circumstances change so that the relevant exemption no longer applies
• Transfers to QROPS in countries such as Malta, Gibraltar, and Australia (for Australian citizens or residents) remain available, but the post-October 2024 rules mean the same-country test must be met to avoid the charge

The QROPS route is appropriate where you intend to permanently settle in another country and want the pension governed by local (rather than UK) pension rules. It is not appropriate for those who plan to return to the UK.

Option 3: Leave as a UK SIPP and Access from Overseas

A third option is to transfer the workplace pension (which may be a group personal pension or a master trust) to a UK SIPP before leaving, and manage it from abroad. The SIPP remains a UK registered pension scheme; you access it under UK rules (from age 55/57); and the tax treatment on access depends on the relevant DTA.

Some UK SIPP providers restrict account access for non-UK residents, impose additional identity verification requirements, or require UK bank accounts for payments. Before transferring to a SIPP with the intention of managing it from overseas, confirm that the provider's terms allow non-resident account holders.

---

UK National Insurance and the State Pension for Non-UK Workers

A non-UK national working in the UK and paying National Insurance contributions is building UK state pension entitlement in exactly the same way as a UK national. The new state pension (for those reaching state pension age from April 2016 onwards) requires 35 qualifying years of NI contributions or credits for the full amount; a minimum of 10 qualifying years is required for any state pension at all.

A non-UK national who works in the UK for eight years and pays NI in each year has eight qualifying years. At state pension age (currently 66, rising to 67 between 2026 and 2028), they would be entitled to 8/35 of the full new state pension — approximately £2,868/year in 2026/27 terms (8/35 of around £12,547), increasing with the triple lock over time.

Totalisation Agreements (social security treaties): The UK has social security agreements with many countries (including the USA, Australia, Canada, most EU countries, and others) that allow NI years contributed in the UK to be combined with equivalent contributions in the other country for the purposes of calculating entitlement in each country. The agreement does not typically create double entitlement — it prevents double contribution in overlapping periods and allows combined records to satisfy qualifying period thresholds.

For example: a US national works in the UK for six years (six qualifying NI years) and in the USA for 30 years. Under the UK-US Totalisation Agreement, when calculating US Social Security entitlement, the UK years can be used to satisfy minimum qualifying periods. When calculating UK state pension entitlement, the US years cannot be used to increase the UK pension — the UK pension is based only on UK qualifying years. But the UK years of six are valid and will generate a small UK state pension from age 66.

Claiming the UK state pension from abroad: The UK state pension is paid to eligible individuals regardless of where they live — including non-UK nationals who have moved back to their home country after working in the UK. However, the "frozen pension" rules apply: if you live in a country with which the UK does not have a "uprating agreement," your UK state pension is frozen at the level it was when you first claimed, not increased with the annual triple lock. Approximately 500,000 UK pensioners are affected by the frozen pension rule; the list of affected countries includes Australia, Canada, and many others.

---

The US Expat UK Pension Complication

For US citizens working in the UK, the UK pension creates a specific and complex set of US tax obligations that do not apply to non-US nationals.

FBAR and FATCA reporting: US citizens must report foreign financial accounts, including foreign pension accounts, on the FBAR (FinCEN 114) and Form 8938 if the balances exceed certain thresholds. A UK workplace pension or SIPP is a "foreign financial account" from the US perspective.

PFIC rules: Many of the investment funds held within a UK pension qualify as Passive Foreign Investment Companies (PFICs) under US tax law. The tax treatment of PFIC investments for US persons is punitive — gains are taxed at the highest marginal rate plus a charge representing "the benefit of tax deferral." For a US person holding a UK pension heavily invested in PFIC funds, the long-term tax efficiency of the pension wrapper is significantly eroded.

The solution — if available — is to ensure the UK pension is invested in non-PFIC assets (for example, US-listed ETFs traded on US exchanges). Some UK SIPP platforms can accommodate this for US clients; most cannot.

UK-US Double Taxation Agreement (DTA) — Article 17: The UK-US DTA has specific provisions for pension income. Broadly:

• Contributions to a UK-registered pension scheme by a US citizen may be deductible for US tax purposes if certain conditions are met (the employer is UK-resident; the employee is not predominantly a US-source income earner)
• Pension income received from a UK scheme by a US-resident is taxed in the US under the DTA, with a credit available for any UK tax withheld

The UK-US DTA is one of the more complex bilateral tax treaties and has specific "saving clauses" that preserve the US right to tax US citizens even where the treaty would otherwise assign taxing rights to the UK. Dual-qualified US-UK tax advisers are essential for US citizens with UK pensions.

---

The Non-Dom in the UK: A Separate Regime

Non-UK domiciled individuals resident in the UK historically benefited from the remittance basis of taxation, which affected how overseas income and gains were treated — though not the treatment of UK pension contributions and growth, which is always UK-sourced. The non-dom regime was substantially reformed in April 2025 (replaced with a 4-year "foreign income and gains" regime for new arrivals). For non-UK nationals considering UK residency, advice on the interaction between the new resident regime and UK pension accumulation is strongly recommended.

---

How Global Investments Can Help

Global Investments specialises in pension and financial planning for internationally mobile individuals, including non-UK nationals who have worked in the UK and are considering their pension options. Whether you are managing a deferred UK pension from abroad, considering a QROPS transfer, or navigating the US-UK pension compliance requirements, our team can connect you with appropriately qualified advisers in the relevant jurisdictions.

Contact us to discuss your UK pension position.