If you’ve been an active member of a UK pension scheme while living outside of the UK, you may be entitled to an enhancement to the lifetime allowance (which is currently £1.03m). The lifetime allowance is the maximum you may save in UK pensions in your lifetime before a taxation is applied on the excess. Your exposure to the lifetime allowance is only tested at certain points in time, so it is important to ensure you have planned for the lifetime allowance before you trigger a test.
Many don’t realise, however, that the tax on the lifetime allowance is simply due to HMRC putting an effective cap on the total tax relief you can have in pension savings. So, the lifetime allowance actually only applies to contributions which have attracted UK tax relief. This means that any contributions you’ve made while not claiming UK tax relief (such as while you’ve been non-UK resident and so not paying UK taxes) may be eligible for enhanced protection. If you believe you may have a lifetime allowance issue – so expecting that by the point of your retirement you will have a total in excess of £1m or so in UK pensions, it would be worth having a chat.
As a note, UK private pensions are simply tested on the fund value at the point of crystallisation, while defined benefit (career-average or final salary) schemes are tested at 20 x income (plus lump sum if you’re eligible to an automatic one). Add all of your pots up together and see if you need to plan ahead.
