Since A-day, there is no legislative restriction on who can be a member of a UK registered pension scheme. So in theory, anyone can join a UK scheme regardless of residency.
The key test for eligibility is based on habitual residence at the point the contract is taken out. For a company, habitual residence is the country in which the business is established. For individuals, it is normally determined by the person’s residential address.
As such, non-UK nationals coming to work in the UK will be able to join a UK scheme providing they satisfy the eligibility criteria, and providing the individual has a contract of employment and a residential address in the UK, this should be sufficient to deem them as habitually resident in the UK. Whilst this means they should be able to join a contract-based scheme, some providers will only accept applications from UK residents; so each case must be looked at on a case-by-case/provider basis.
As far as tax relief goes, company contributions should receive tax relief if they pass the ‘wholly and exclusively’ test, and personal tax relief is dependent on whether the individual is classed as a relevant UK individual for the tax year in question. To qualify, they need to either:
1. Have relevant UK earnings chargeable to UK income tax for that year
2. Have been tax resident in the UK at some time during that year
3. Have been tax resident in the UK at some time during the five tax years immediately before that year and when they became a member of the pension scheme, or
4. They, or their spouse/civil partner, need to have had general earnings from overseas Crown employment subject to UK tax for that year
As always, tax relief on personal contributions is restricted to 100% of relevant UK earnings, or £3,600 if higher.
Condition 3 above does enable an individual who is moving overseas, and who no longer has relevant UK earnings, to continue contributions for a further five tax years. As long as the pension contributions are paid to a scheme that was established prior to the individual becoming non-resident, tax relief will be available on:
• 100% of their relevant UK earnings (or £3,600 if higher) in the tax year they become non-resident
• £3,600 for a further five tax years
Just one last thing: non-UK residents should check there are no tax implications in their country of residence if they make contributions to a UK pension scheme, and the tax position when they take benefits also needs to be discussed.
Cameron Millar is the International Employee Benefits Consultant.
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