Phased Retirement for Internationally Mobile Professionals

The traditional model of retirement — full-time work one day, full retirement the next — is increasingly rare. Most internationally mobile professionals today expect to transition gradually: reducing work commitments progressively, mixing consultancy or non-executive work with emerging retirement income, and stepping fully into retirement over several years rather than on a fixed date.

This phased approach has real advantages. It smooths the psychological transition, allows retirement income sources to be tested, reduces sequence of returns risk in the critical early drawdown period, and preserves optionality. But for internationally mobile professionals, managing the financial, tax and residency dimensions of a phased retirement requires careful planning across multiple phases.

Why Phased Retirement Is Attractive for the Internationally Mobile

Residency and visa implications. Many international retirement visa regimes require evidence of passive income rather than employment income — a threshold of pension, investment income, or financial assets. A phased retirement during which employment income is gradually replaced by investment income may require managing these thresholds carefully.

Tax efficiency. The transition from employment income to pension and investment income can be optimised significantly in a phased approach. Choosing which country to be resident in during different phases — and which income sources to draw on in which phases — can make a material difference to lifetime tax paid.

Pension access timing. UK pensions can currently be accessed from age 55 (rising to 57 in 2028 under current legislation). For a professional who plans to work part-time to 65, partial drawdown from a pension from age 57 alongside continuing employment income may be possible — but the interaction with annual allowance rules (specifically the Money Purchase Annual Allowance, or MPAA) must be understood.

Sequence of returns management. Working part-time in the early years of a phased retirement means drawing less from the investment portfolio, giving it more time to compound. This significantly reduces sequence of returns risk compared to drawing full income immediately.

The Three Phases of Phased Retirement

Phase 1: Pre-Retirement (Typically 5–10 Years Before Target Retirement)

This is the planning and preparation phase. Key activities:

Defining the target. What does retirement actually look like for you — full retirement, part-time work, consultancy, portfolio directorships? In which country or countries? At what income level? The answers to these questions drive the entire financial plan.

Financial audit. As discussed in our guide on retirement planning for globally mobile professionals, a complete audit of pension pots, state pension entitlements, investment assets, property and business interests is the starting point.

Gap analysis. The difference between what you have (projected to retirement) and what you need is the gap. The pre-retirement phase is when this gap can still be closed — through additional pension contributions, investment, or extending the working period.

Tax and residency planning. Pre-departure from employment is the critical window for restructuring. Moving from a high-tax country to a lower-tax one before retiring can be extremely tax-efficient — but timing matters, particularly in relation to the disposal of business assets, realisation of share options or other employment-related wealth.

Pension strategy. In the pre-retirement phase, the question of pension consolidation, QROPS vs. SIPP decisions, and defined benefit pension transfer decisions (if applicable) should be resolved. Once drawdown begins and the MPAA applies, pension contribution strategy changes.

Phase 2: Phased Retirement (Transition, Typically 3–10 Years)

This is the transition period — typically combining continuing but reduced employment or consultancy income with the early stages of drawdown from investment assets and possibly pension assets.

Income layering. In Phase 2, income comes from a mix of sources: remaining employment/consultancy income, investment portfolio income, and potentially partial pension drawdown. The relative proportions shift as work income decreases. Planning the sequencing of which sources are drawn in which year — to optimise tax and pension allowances — requires careful modelling.

Pension drawdown initiation. If pension benefits are taken in Phase 2, consider carefully:

• Taking the tax-free pension commencement lump sum (PCLS, 25% of pension fund up to the available limit) in a tax-efficient year
• The trigger of the Money Purchase Annual Allowance (MPAA) if flexible access is taken. Once triggered, pension contributions are limited to £10,000 per year (as of 2026; subject to change). This can significantly restrict pension top-up if consultancy income continues
• Whether to take drawdown from the pension at all in Phase 2, or to delay and let the pension fund continue growing

Residency management. Phase 2 often involves genuine flexibility about where you spend time. This creates both opportunity (choosing tax-efficient residency during the transition) and risk (inadvertently triggering tax residency in a high-tax country by spending too much time there). The UK Statutory Residence Test must be carefully monitored if you spend any time in the UK.

National Insurance and State Pension. Voluntary NI contributions to complete the UK state pension record should be addressed in Phase 2 if gaps remain. Class 3 voluntary contributions cost £18.40 per week in 2026/27 (approximately £957 for a full qualifying year — verify current rates). Given the current full new state pension of approximately £12,548 per year (£241.30 per week in 2026/27) for a full 35-year record, topping up missing years is usually excellent value.

Business wind-down. For business owners, Phase 2 typically involves planning the transition or sale of business interests. The tax planning around a business sale — including Business Asset Disposal Relief (formerly Entrepreneurs' Relief), timing relative to tax year and residency, and reinvestment of proceeds — should be addressed well in advance.

Phase 3: Full Retirement

Phase 3 is full retirement — all income comes from pensions, investments, state benefits, and other passive sources. The key tasks:

Transition to full drawdown. The income architecture shifts entirely to passive sources. Investment portfolio drawdown replaces employment income. The drawdown strategy (systematic withdrawal, bucket approach, annuitisation for a portion of income) is finalised.

Final residency decision. If you have not already committed to a permanent retirement location, Phase 3 typically requires this decision. The tax, estate planning and practical care implications of the chosen location become permanent considerations.

Estate planning review. Phase 3 is the appropriate point for a thorough estate planning review, particularly in light of the chosen permanent jurisdiction, updated IHT exposure (for UK-domiciled individuals, the rules continue to evolve), and trusts or other structures.

Cost of living reality check. Planned retirement budgets almost always require adjustment based on actual experience. The first year or two of full retirement typically involves recalibrating the spending plan against reality.

Tax Planning Through the Phases

The tax planning opportunities in a phased retirement are significant and are substantially more available to internationally mobile individuals than to domestic retirees who remain in one jurisdiction throughout.

Key opportunities:

Crystallising gains in low-tax years. During Phase 2 years when employment income has reduced but before other income sources have ramped up, there may be a window of lower total income. Realising capital gains in these years — rebalancing the investment portfolio, disposing of assets — can be done at lower rates or within the annual CGT exemption.

Pension contributions in high-income years. While still earning above the pension annual allowance threshold, maximise pension contributions (including carry-forward of unused annual allowance). Contributions generate tax relief at the marginal rate.

ISA contributions. For those retaining or regaining UK tax residency during Phase 2, annual ISA contributions build a growing pool of tax-free investment income and capital for Phase 3.

Choosing residency during Phase 2. Spending Phase 2 resident in a lower-tax jurisdiction — one with a favourable retirement tax regime or territorial tax system — can dramatically reduce the tax cost of business sale proceeds, pension lump sums, or investment income during the transition.

Pension commencement lump sum timing. The PCLS is tax-free. Taking it in a year when other income is low and you are resident in a low-tax jurisdiction is generally optimal.

Common Mistakes in Phased Retirement Planning

Triggering the MPAA inadvertently. Taking flexible access from a pension before intended (e.g., triggering drawdown to test the system) activates the £10,000 MPAA restriction. This severely limits future pension contributions while still earning.

Failing to plan residency through Phase 2. Mobility is high in Phase 2. Without active management of residency, it is easy to inadvertently become tax resident somewhere unexpectedly expensive.

Underestimating Phase 2 income. Consultancy and non-executive roles often generate more income than anticipated during Phase 2. Without planning, this income may be more heavily taxed than necessary.

Delaying LPA and incapacity planning. Phase 2 is the ideal time to put lasting powers of attorney and related documentation in place — while full capacity is unquestioned and the documents are not yet urgently needed.

Not reviewing beneficiary nominations. Pension beneficiary nominations do not automatically update with life changes. Review these at the start of Phase 2 and again when entering Phase 3.

How Global Investments Can Help

Phased retirement is one of the most financially complex transitions an internationally mobile professional faces. The interaction of employment income, pension drawdown, investment income, residency planning, business sale proceeds and estate planning requires genuinely integrated advice rather than a series of disconnected conversations with domestic specialists.

Global Investments provides holistic phased retirement planning for internationally mobile HNW professionals, covering income strategy, tax planning, pension decisions, investment management, residency guidance and estate planning. We build comprehensive lifetime cash flow models that map the transition from work to retirement across all phases and all jurisdictions.

Contact us to discuss your phased retirement plan with one of our senior advisers.

Tax rules, pension legislation and visa requirements are subject to change. Tax treatment depends on individual circumstances. This guide is for information purposes only and does not constitute regulated financial advice. Seek qualified regulated advice before making decisions about pension drawdown, residency or income strategy.