US Expats Guide to Saving for Retirement in the UK

Joshua Madden
Aug 1
4 min read

Originally published: Dec 19, 2022 | Updated: July 31, 2025

Understanding UK Pensions as a US Expat

If you're a US citizen employed by a UK firm, chances are you've been auto-enrolled into a workplace pension scheme. This is part of the UK’s auto-enrolment policy, which mandates eligible employees be placed into a defined contribution (DC) pension plan. Contributions are made into a personal pension pot, which can be invested across a variety of funds—how broad your options are depends on your pension provider.

Minimum Auto-Enrolment Contributions (as of 2025):

Employee: 5% (including tax relief)
Employer: 3%

Note: Contribution splits may vary, so confirm with your HR or benefits administrator.

Key Considerations for Americans Saving in UK Pensions

US Citizens and UK Pensions

The US-UK Tax Treaty provides favorable treatment for Americans in UK pension schemes. Pension growth inside a UK-registered scheme is not subject to current US taxation, and Passive Foreign Investment Company (PFIC) rules do not apply within these plans. This makes UK pensions one of the few tax-efficient vehicles available to Americans abroad.

For more, see: Dunhill Financial’s PFIC Reporting Explained.

Lifetime Allowance — Abolished in 2024

The Lifetime Allowance (LTA)—which previously capped the amount you could accumulate in UK pensions tax-free at £1,073,100—was abolished as of April 6, 2024.This means there is no longer a cap on how much you can accumulate in your UK pensions. However, income tax will still apply when you begin drawing your pension.

*While the LTA has been abolished, some transitional protections and reporting obligations may still apply for those with large pension pots. Speak to a qualified financial advisor or tax professional for guidance.

Pension Contribution Allowances (2025/26)

Annual Allowance: £60,000 per tax year (or 100% of your UK-earned income, whichever is lower)
Contributions above this amount may be subject to the Annual Allowance Charge.

Carry Forward Rule

If you’ve not used your full annual pension contribution allowance in the previous three tax years, you can carry forward the unused allowance into the current tax year—provided:

You were a member of a UK-registered pension scheme in each of those years.
Your total contribution does not exceed your current year’s earned income.

This can be especially useful for higher earners or those who want to make a lump sum contribution in a single year.

How Does the Carry Forward Rule Work?

The following table shows an example of how much allowance could be carried forward:

Tax Year	Annual Allowance	Total Contribution	Unused Allowance
2021/22	£40,000	£30,000	£10,000
2022/23	£40,000	£30,000	£10,000
2023/24	£60,000	£30,000	£30,000
2024/25	£60,000	£60,000	£0
2025/26	£60,000	£60,000	£0

In the 2025/26 tax year, the individual could carry forward £50,000 of unused allowance (from 2021/22 through 2023/24).Combined with the £60,000 current annual allowance, they could contribute up to £110,000 tax-efficiently—provided their income in 2025/26 is at least £110,000.

Tax Relief on Contributions

Private and workplace pensions in the UK benefit from generous tax reliefs:

Relief at Source: 20% tax relief is added to your contributions automatically (e.g., you contribute £80, the government adds £20).
Net Pay Arrangements: Contributions are taken from gross salary, reducing taxable income; no additional relief is given at the source.

If you are a higher-rate (40%) or additional-rate (45%) taxpayer, you can reclaim the difference via:

Self-Assessment
Contacting HMRC directly

Employer contributions are not eligible for personal tax relief, as they are made pre-tax.

Accessing Your UK Pension

Current access age: 55
Rising to: 57 in April 2028

There are multiple withdrawal strategies available at retirement, each with unique tax implications in both the UK and US. We’ll cover these in a separate, dedicated article.

US Expats: Strategic Priorities Checklist

Before ramping up contributions or transferring pensions, we suggest working through the following checklist:

Emergency Fund
Ensure 3–6 months of expenses are held in an easy-access account before committing more to long-term retirement investments.
Specific Savings Goals
Budget for near-term needs—e.g., home purchase or education—before locking funds into pensions.
Pre-Retirement Investment Objective
Since pension funds are inaccessible before age 55 (57 from 2028), use ISAs or general investment accounts for pre-retirement financial goals
Increase Contributions When Appropriate
Once short-term needs are addressed, consider increasing contributions for long-term tax-advantaged growth.Pension investments grow tax-free and can compound significantly over time. The earlier you start, the better.
Consolidate Old Pensions
If you have several dormant pension schemes from past UK employers, consider consolidating them into one plan. This simplifies oversight and may reduce fees.
Consider a SIPP
If you’ve accumulated £50,000+ across pensions, you might consider transferring to a Self-Invested Personal Pension (SIPP) for:

-Greater control over investments

-Potentially lower fees

-Access to US-compliant funds (with careful planning)

You can continue contributing to your workplace scheme while periodically transferring excess funds into a SIPP.

Final Thoughts

UK pensions can be a powerful tool for US expats looking to build long-term, tax-efficient retirement savings—especially in light of recent rule changes such as the abolition of the Lifetime Allowance. However, navigating the interaction between UK and US tax systems requires expert advice.

If you’re considering large contributions, consolidations, or transfers, speak with a financial adviser experienced in both US and UK systems.

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