How do UK pensions work for Tier 2 immigrants who may choose to return to their home country in a few years?

[MichellePfeiffer]

I recently moved to the UK on a Tier 2 General Visa. The visa is valid for 3 years and as per the laws here, I have an option of opting in for the pension scheme via my employer.

There is also an option of going for a salary sacrifice. I don't fully understand this yet, but it seems like a way to shift over part of my salary directly to pension before any tax deductions are calculated (thus, saving tax). I am not sure what the impact will be on monthly in-hand salary.

My question is about how pensions in the UK work for immigrants like myself. If I go back home after a certain number of years (could be 1 or could be 10), what happens to the pension corpus? Am I allowed to take it out (with interest?) and do I have to pay taxes on the liquidation amount?

Any help will be greatly appreciated.

[CR001]

You can't 'take it out' or 'cash it in' until you are at least 55 years old.

You can however transfer the pension into a pension or retirement scheme in your home country.

You would need to speak to the pension scheme.

[secret.simon]

I believe that you can also choose to opt out of the pension scheme and invest the pension pot yourself, in a SIPP (Self-Invested Pension Plan).

You should be able to manage the pension investments for that yourself. You'd definitely want to speak to an Independent Financial Adviser before doing that.

[MichellePfeiffer]

You can't 'take it out' or 'cash it in' until you are at least 55 years old.

You can however transfer the pension into a pension or retirement scheme in your home country.

You would need to speak to the pension scheme.

Thank you for the quick response. I just looked up pension transfer across countries and got a bunch of warnings regarding how Brexit will impact the transfer.

So many complications.

[MichellePfeiffer]

I believe that you can also choose to opt out of the pension scheme and invest the pension pot yourself, in a SIPP (Self-Invested Pension Plan).

You should be able to manage the pension investments for that yourself. You'd definitely want to speak to an Independent Financial Adviser before doing that.

Thank you for the advise. I checked out SIPP and it seems like even in an SIPP the employer must contribute 5% match (which is a good thing).

[secret.simon]

Check if your existing pension plan is defined benefits or defined contributions. If the former, definitely seek independent financial advice.

Although your employer may choose to contribute to your SIPP, there is no obligation that they do so.

Also see the rest of the Pension Advisory Service's website.

I'm fairly certain that even SIPPs, because they are pension plans, can be accessed only after you are 55 at the earliest. And even if you are allowed to, HMRC can take a hefty 55% of it in taxes. So, weigh the pros and cons and consult a registered financial advisor, not an immigration forum.