Pension Planning in a Global Economy: What You Need to Know in 2025

The Year to Recalibrate

If you've glanced at pension headlines recently, you might have seen a lot of noise – lifetime allowance scrapped here, inflation-adjusted thresholds there. It sounds like chaos. But here’s the upside: 2025 could be one of the best years in recent memory to rebuild your pension strategy around today’s rules, especially if you’re living or working abroad.

Yes, the rules are evolving. But with those changes come new possibilities. Whether you’re building, consolidating, or drawing from your pension, there’s more room than ever to shape a strategy that works for you, not just for the system.

The Pension Landscape in 2025: What’s Changed?

2025 is shaping up to be a transformative year for pensions, not just in the UK but across multiple jurisdictions. Some of the biggest shifts include:

• The scrapping of the UK Lifetime Allowance (LTA):
  After years of cap increases, freezes, and speculation, the LTA has finally been abolished. While this removes the penalty for building a large pension pot, it also introduces new limits on how much you can take as a tax-free lump sum, now fixed at £268,275 unless you hold LTA protections or apply for a Transitional Tax-Free Amount Certificate. This certificate ensures that those who built up larger tax-free entitlements under the old rules can preserve them, but it must be applied for and verified by the scheme administrator
• Rising State Pension Ages:
  In the UK and many parts of Europe, the retirement age is climbing. France recently triggered protests by pushing theirs to 64, while the UK remains on track to increase the State Pension Age to 67 by 2028, with a further review underway considering a rise to 68 after 2037. Planning for earlier retirement now means relying more on personal pensions and investments.
• Tighter restrictions on EU pension transfers:
  Although cross-border pension planning has traditionally favoured mobility, recent UK tax changes are reversing some of that flexibility. From 30 October 2024, a 25% Overseas Transfer Charge (OTC) was applied to most transfers of UK pensions to the EEA - unless the individual and the pension were both based in the same jurisdiction. For many expats, this marks a shift from open transferability to a more penalised framework, and it's something to plan for carefully if a move is on the cards.
• More choice in how pensions are invested:
  ESG-friendly funds are gaining ground, and many schemes now offer wider access to global markets. In fact, recent data shows that 60% of employers have seen increased staff interest in responsible pension options, and around 17% of default workplace pension funds are now ESG-focused, according to Pensions Age (2024). This flexibility can be a big plus, especially for expats with a broader financial horizon.

While staying compliant is essential, the real gains come from aligning your pension with the country where you’ll actually retire, in both tax treatment and currency exposure.

How These Changes Affect You

So what does all of this mean in practical terms, especially for expats or internationally mobile professionals?

• No LTA means more room to grow.
  If you paused pension contributions in fear of breaching the lifetime allowance, now could be the time to reassess. For high earners, particularly those abroad using offshore pension wrappers or SIPPs, the playing field just widened. But be aware: the tax-free lump sum is now capped, and your income from pensions will still be taxable.
• Currency and inflation risks matter more than ever.
  Receiving income in pounds while living in baht, euros, or dollars means you’re exposed to FX fluctuations. A weak pound can be a boon; a strong one, a burden. Aligning your pension drawdown with your country of residence (or at least partially hedging) is now a critical planning step.
• Tax efficiency is location dependent.
  Yes, tax rules vary by country. But that variation can work in your favour. Many expat-friendly destinations like Portugal and Thailand offer advantageous tax treatment, and even in tighter jurisdictions, proper structuring can still reduce your liability.
• Fragmented pots = fragmented planning.
  Moving across borders often leaves people with pensions in multiple places. If you’ve worked in the UK, Hong Kong, and Singapore, you could have three entirely different schemes - none of which talk to each other. That can make things messy at drawdown and expose you to avoidable fees and taxes.

The bottom line? These changes can work for you, but only if you take control before life does it for you.

Three Key Mistakes to Avoid and How to Turn Them Around

Here’s what trips up many otherwise savvy expats:

1. Letting inflation sneak up on you

Over a 30-year retirement, even modest inflation can halve your buying power. But it doesn’t have to. Investing in diversified assets or inflation-linked instruments keeps your income growing with you, rather than losing ground each year.

2. Taking income without a strategy

Withdrawing from the wrong source at the wrong time could mean paying thousands more in tax than necessary. Flip the script: plan withdrawals by tax band, location, and income type, so you keep more of what you’ve earned.

3. Ignoring your old pensions

That scheme you left behind in the UK or your previous employer in Asia? It might be underperforming, charging high fees, or not aligned with your goals. Consolidation doesn’t just declutter, it empowers you to actively manage your retirement.

Mistakes are common. What matters is how early you correct them.

Positive Planning: What You Can Do Now

The goal isn’t to chase every tax angle or guess the next market rally. It’s about stacking the odds in your favour, using the tools available to make smart, stable decisions.

One potential strategy you could implement is to consolidate your pension pots. If you have multiple pensions across jobs, countries, or decades, consolidating them could reduce fees, simplify access, and give you clearer control over investments. International SIPPs or a Qualifying Recognised Overseas Pension Scheme (QROPS), if still applicable, can help, especially if you’re abroad long-term. This isn’t for everyone, so it is best to get expert guidance on the best route forward for your financial future.

You should also use this year’s tax breaks while they last. In the UK, pension contributions remain one of the few tools where you get tax relief on the way in. In 2025/26, high earners can still claim 40-45% relief on contributions (subject to limits). And with the LTA gone, the fear of growing your pot “too much” has eased.

Matching your pension to your life abroad is a great next step. If you’re retiring in Spain, Thailand, or Portugal, make sure your pension income strategy reflects that. That might mean holding assets in euros or baht, drawing from local plans first, or using tools like offshore bonds to smooth out tax.

Finally, plan to drawdown like a professional. Most people draw from pensions when they “need the income.” But a better question is: how do I draw efficiently over 30 years? Mixing taxable and non-taxable accounts, staggering withdrawals, or deferring State Pension can all help balance your income and reduce tax in retirement.

It’s not about overengineering, it’s about structuring intentionally.

More Opportunity Than Obstacle

Pensions in 2025 aren’t simpler, but they are more responsive. For those who take the time to look ahead, this is a year of leverage.

The key is to act early, stay informed, and treat pension planning as something to lean into, not put off. Whether you're years away from retirement or already drawing down, there’s always room to optimise, consolidate, and align your pensions with the life you want to lead.

The old model of “save and hope for the best” just doesn’t cut it anymore. And that’s a good thing. Because with better information, better tools, and reliable professional help, your pension can do more than just provide for the future. It can help you shape it.

Get in touch for more information on how we can provide professional help.