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CYPRUS: Home or away? That's the pension plan puzzle for the expat

13 May, 2019 | Posted By: Michael Doherty

Many people move to Cyprus after they have retired or when they are about to retire. They want to live the expat dream and will have made plans to pay for it.


If they haven’t, their dream could turn to a nightmare. A state pension, from the UK or anywhere else, will not be enough to fund a pleasant lifestyle on the island.

But not all British expats fall into the retirement category. Many are working people. Typically, they are enthusiastic, career-driven professionals who have taken some steps up the corporate ladder.  

They move abroad for further advancement and because they relish new challenges.

Pensions may not have been a big consideration for them, but it is very likely that they will have been paying into a private scheme, probably linked to their job.

There was a time when this might have been a defined benefit scheme, with payments determined by final or average salary.

Nowadays such schemes are almost as rare as hens’ teeth. Far more common is the defined contribution scheme where your pension will be based on how much money has been paid into your pension pot by you and your employer and how well this money has performed for you.

Not all employers make contributions, so it is quite common for workers to make their own pension arrangements, investing in schemes which offer tax benefits if the money is used to fund retirement.

A key question for anyone moving here is whether to keep paying into a scheme in your home country or opt for one based in Cyprus.

The answer will depend on how you see your career developing. Will you continue to live in Cyprus and possibly retire here?

Are you likely to move to other countries? Do you see yourself returning to the UK either to work or to retire there?

If you plan on retiring outside your home country you can either leave your pot there and take out your money abroad or move your pension pot abroad. British expats can also mix these options, leaving one pension in the UK and moving another abroad.

If you intend to transfer a pension, make sure you transfer the money into a qualifying recognised overseas pension scheme or there will be a tax charge. These schemes meet the same standards as those in the UK.

You will also want to know whether your pension will increase in value to sufficiently fund your retirement plans.

Many people have several small pensions that are not growing as they should. One way British citizens can make their money work is through a self-invested personal pension (SIPP).

This is a form of pension that gives you the freedom to choose and manage your own investments, from a wide range approved by HM Revenue and Customs.

You can make regular and one-off payments into your SIPP and, like other pensions, the British government will give you up to 46% tax relief on the amount you pay in.

Anyone under 75 who is a UK resident for tax purposes, or a Crown employee, can open and pay into a SIPP. Even if you are not earning you can contribute up to £2,880 net each tax year and receive tax relief.

Since there are so many pension options for the expat, I cannot over-emphasise the importance of taking sound, impartial advice.

My company, the Woodbrook Group, can help you understand your options - whether that is a SIPP or another scheme - how to address your income needs in retirement and how much wealth you will need to support the lifestyle you want.

It is never too soon to make plans for retirement but if you make the wrong decisions it can sometime be too late.