Resources & Insights

Pension Planning for Military Veterans Living Abroad

By QROP Direct Editorial Team · Reviewed by an independent regulated pension specialist · Reviewed 2026-06-10

Pension Planning for Military Veterans Living Abroad

The UK's armed forces — Army, Royal Navy, and Royal Air Force — deploy service members globally throughout their careers, and many veterans choose to retire abroad after leaving service. For this community, pension planning has distinctive characteristics that differ from civilian pension planning: the Armed Forces Pension Scheme (AFPS) is a government-funded defined benefit arrangement with specific rules that every veteran needs to understand.

This guide explains how the AFPS works for veterans living abroad, the tax treatment of military pensions under international tax treaties, and how veterans can build additional pension wealth through civilian pension arrangements.

This guide is for information purposes only and does not constitute financial, tax or legal advice. Military pension rules and tax treaty positions are specific to individual circumstances. Always take specialist advice.

Key Takeaways

• Armed forces pensions cannot be transferred — they are preserved DB benefits, not transferable
• Most DTAs treat military pensions as government service pensions — taxable only in the UK
• The UK personal allowance applies to veterans regardless of country of residence (for UK-source income)
• Veterans returning to civilian employment can build further pension savings through SIPPs
• Ill-health and early departure benefits have their own rules — understand these before leaving
• Veterans UK (via the Joint Personnel Administration system) is the administrator of AFPS pensions

The Armed Forces Pension Scheme: A Summary

There are several AFPS sections, corresponding to different service periods:

• AFPS 1975 — Closed to new entrants 2005. Provides benefits from age 55 (for officers, lower for other ranks who left before certain dates)
• AFPS 2005 — Open from April 2005, provides Early Departure Payment (EDP) after qualifying service plus preserved pension to state pension age
• AFPS 2015 — Current scheme for all regular and reserve personnel from April 2015. Career average scheme; Normal Pension Age = state pension age (currently 67)

The Key AFPS 2015 Features

Under AFPS 2015: - Accrual rate: 1/47th of pensionable earnings per year of qualifying service - Revaluation: Active service benefits revalued by earnings increases; preserved benefits revalued by CPI - Normal Pension Age: State pension age (67 for those born after 1960) - Early Departure Payment (EDP): Available for members who leave with 20+ years' service before reaching the EDP age (60) - Ill-health benefits: Enhanced benefits for those forced to leave due to injury or illness attributable to service

Can Armed Forces Pensions Be Transferred?

No. Armed forces preserved pensions cannot be transferred to a SIPP or QROPS. The AFPS is an unfunded government scheme and does not provide cash equivalent transfer values to deferred members. The preserved pension simply accumulates in deferment until the member reaches pension age and claims it.

This means the question for veterans living abroad is not "should I transfer?" but "how do I access my pension from abroad and how is it taxed?"

Receiving Your Military Pension Abroad

Armed forces pensions are administered by Veterans UK (part of the Ministry of Defence). To receive your pension while living abroad:

1. Notify Veterans UK of your overseas address. This is essential for statements and correspondence.

2. Provide overseas banking details. Veterans UK can pay directly to an overseas bank account. BACS payment to a UK account is also an option if you maintain one.

3. Apply for your pension at the appropriate age. Pensions are not paid automatically — you must claim them. For AFPS 2015 preserved pensions, this is at state pension age. For AFPS 2005 and AFPS 1975, different rules apply.

4. Confirm your tax status. If you have applied for non-UK residence, you may need to submit HMRC form DT-Individual (or equivalent) to ensure UK tax is not deducted at the basic rate before you can claim it via a personal tax return.

Tax Treatment of Military Pensions Abroad

The Government Service Pension Rule

Under the OECD Model Treaty — the basis for most UK DTAs — pensions paid by a government for past government service are taxable only in the source country (the UK), not in the country of residence.

Armed forces pensions are government service pensions. Under most UK DTAs, this means: - The pension is taxable only in the UK - The UK personal allowance (£12,570 in 2026) applies - UK income tax is calculated on the pension as if the veteran were UK resident - The veteran does not pay income tax on the pension in their country of residence

This is a significant advantage. Veterans living in countries with higher income tax rates (France, for example, where marginal rates can exceed 41%) can receive their military pension tax-free in France, paying only UK income tax.

Exceptions and Limitations

Not all DTAs follow the government service pension rule identically. Some countries have specific provisions that affect this treatment:

• Australia: The UK-Australia DTA has specific provisions. Veterans should take specific advice before moving to Australia.
• Countries with no UK DTA: If you are resident in a country with no DTA with the UK, the UK pension may be taxable in both countries (though UK income tax paid can sometimes be offset).
• State pension: The UK State Pension is not a government service pension — it is taxable in the country of residence under most DTAs.

UK Income Tax on Military Pensions

Even as a non-UK resident, if your AFPS pension is taxable only in the UK, you remain a UK taxpayer on that income. You are entitled to the UK personal allowance (£12,570) regardless of residency. UK income tax is deducted at source by Veterans UK — your pension will be paid net of UK income tax at the appropriate rate.

You will need to submit a UK self-assessment tax return if your total UK-taxable income requires one (typically if income exceeds the personal allowance, or if you have other UK income).

Building Civilian Pension Savings After Service

Many veterans leave the armed forces in their 30s or 40s and pursue second careers — often in the civilian private sector, in defence contracting, or in overseas government service. For this post-military career, building additional pension savings is important.

International SIPP for Veterans Abroad

If you are working abroad after leaving the armed forces, an international SIPP allows you to make tax-relieved contributions to a UK registered pension scheme (subject to the earnings rules — up to £60,000/year with UK earnings, or £3,600/year without UK earnings for up to 5 years).

The SIPP complements the AFPS preserved pension — when combined at retirement, they can provide a strong income from both sources.

Civilian DB Pensions

Veterans who enter public sector civilian employment — teaching, NHS, civil service — may join those sectors' DB schemes. As with the AFPS, these are almost always worth leaving deferred rather than transferring. See our pension planning for healthcare workers guide for NHS-specific guidance.

Resettlement and Pension Planning Support

The military resettlement process (for those leaving with sufficient qualifying service) includes career transition support. Financial guidance within the resettlement programme covers the basics of the AFPS, but it does not typically constitute regulated financial advice.

For veterans making significant financial decisions — particularly those with substantial AFPS benefits plus civilian pension savings, or those considering significant property or investment decisions alongside pension planning — engaging an independent regulated financial adviser at the point of leaving service is strongly recommended.