The 3–5 Year Pre-Retirement Window: What to Do

In financial planning, the distribution of decision-making importance across a lifetime is not uniform. The years immediately before retirement — roughly three to five years out — carry disproportionate weight. Decisions made during this window shape the tax efficiency, capital availability, protection, and legal security of the next two or three decades. Done well, pre-retirement structuring can save significant tax, protect substantial wealth, and provide lasting peace of mind. Done poorly or left until too late, opportunities that were straightforward become complex, expensive, or impossible.

This guide sets out a comprehensive pre-retirement action plan for internationally mobile high-net-worth individuals, working backwards from the retirement date to ensure every action is taken at the right time.

1. Domicile and Residency Review

If you are planning to leave the UK on or around retirement, the timing of your departure has significant implications.

IHT and the Long-Term Resident test. From April 2025, the Long-Term Resident (LTR) test determines IHT exposure for long-term UK residents (those resident for 10 of the prior 20 years) regardless of domicile. Leaving the UK before retirement — or as part of the retirement transition — starts the clock running on leaving the LTR net. The earlier you depart, the sooner you exit the LTR regime and cease to have UK IHT exposure on worldwide assets. This is not a reason to leave precipitously, but it is a genuine planning consideration if IHT is a concern.

Excluded property trust. If you are non-UK domiciled and wish to establish an excluded property trust to shelter overseas assets from UK IHT, this must be done before you become an LTR or before you become UK-domiciled. The trust must be settled while you have the right status. This is time-sensitive: if you have been approaching the LTR threshold, establishing the trust before crossing it is critical.

Domicile of origin. If you have maintained non-UK domicile and wish to preserve it, the evidence record (permanent home overseas, overseas will, ties to the overseas jurisdiction) should be strong and well-documented before retirement.

2. Pension Decisions

The pension decisions that should be made — or at least analysed — in the pre-retirement window:

SIPP vs QROPS. If you are moving abroad permanently, should you transfer your UK pension(s) to a Qualifying Recognised Overseas Pension Scheme? The decision depends on: the country you are moving to; whether a suitable QROPS exists in that country or a third country; the Overseas Transfer Charge (25% unless the transfer qualifies for the narrow same-country-residence exemption — the previous EEA/Gibraltar exemption was abolished on 30 October 2024); the tax treatment of UK pension income under the relevant double tax treaty; and whether the QROPS jurisdiction's pension rules (access age, death benefits, reporting) are better suited to your plans. This analysis should be done at least two to three years before retirement — not at the point of departure.

Timing of crystallisation and PCLS. When you "crystallise" your pension (formally draw benefits or move to drawdown), you trigger your entitlement to the Pension Commencement Lump Sum (PCLS) — tax-free cash of up to 25% of the crystallised value, subject to the Lump Sum Allowance of £268,275 for 2026–27 (the lifetime allowance was abolished on 6 April 2024 and replaced by the Lump Sum Allowance, which currently caps tax-free cash). Timing the crystallisation for a year when other income is low can reduce the income tax cost on any pension income drawn in that year. If you plan to move abroad, crystallising before departure avoids potential complications with QROPS rules or the new country's treatment of the PCLS.

Defined benefit pensions. If you have a defined benefit (final salary) pension, the transfer value — the capital equivalent — may be substantial. Whether to transfer out of a DB scheme is a regulated decision requiring specialist independent financial advice. The decision is often complex and depends on your health, other assets, the scheme's financial strength, and your plans in retirement. This analysis should begin well in advance of the normal retirement age.

Phased retirement. Pension income can be taken in stages — crystallising different portions of the fund in different tax years, managing annual income tax liability while maintaining the investment growth on the undrawn portion. Phased retirement strategy should be planned before the drawdown phase begins.

3. Establish the Offshore Bond Before Leaving

An offshore investment bond is most cleanly established while you are UK-resident. The UK tax treatment is well-defined: growth is tax-deferred, the 5% annual withdrawal allowance applies, and on encashment, the chargeable gain is assessed to income tax with top-slicing relief.

If you establish the bond after becoming resident in another country, that country's tax rules will govern the bond's treatment, and those rules may be less favourable — some countries treat offshore bonds as transparent for tax purposes, eliminating the deferral benefit; others have specific rules for foreign insurance policies.

If you have significant savings that you intend to invest for the long term and eventually draw in a structured way through retirement, establish the offshore bond at least a year before your intended departure date. Invest a substantial initial premium to start the tax-deferred growth clock, and plan subsequent contributions and withdrawals in the context of your overall retirement income plan.

4. State Pension: Fill NI Gaps and Apply for the NT Code

National Insurance gaps. The full UK new state pension (£241.30 per week in 2026–27, increasing annually) requires 35 qualifying years of National Insurance contributions. Many internationally mobile individuals have gaps in their NI record from years spent abroad. Voluntary Class 3 NI contributions can fill these gaps at a cost of approximately £940 per year (2026–27 rate of around £18 per week). The return on investment is exceptional: a single year's voluntary contribution buys approximately £6.90 per week of additional state pension — a return that in normal investment markets would be very hard to match, even before considering the inflation-linking and longevity guarantee.

Check your NI record on the HMRC government gateway website and take advice on whether filling gaps is cost-effective in your specific circumstances. The rules on voluntary contributions — including which years can be filled and at what rate — are complex and have changed over time. The deadline for filling certain historical gaps was extended to April 2025 under a temporary scheme; subsequent rules govern what can now be filled.

NT tax code. If you will be receiving UK pension income as a non-UK resident, you should apply to HMRC for an NT (No Tax) code under the relevant double tax treaty. This allows your pension to be paid gross (without UK PAYE withholding) and taxed only in your country of residence. The application process involves form FD9 or the equivalent and can take several months — apply well in advance of the pension start date to avoid over-withholding.

5. Update All Legal Documents Before Departure

Updating wills, Lasting Powers of Attorney, and trust documents while still UK-resident is dramatically easier than doing so from abroad. Once you have left the UK:

• Foreign notarisation and apostille requirements add cost and complexity
• Your UK solicitor may be less familiar with the international element
• Time zones and logistics complicate the process
• In an emergency, you may not be able to execute documents quickly

Before departure, ensure:

Will. Your UK will is up to date and reflects your current family situation, asset base, and wishes. If you have overseas assets, a separate will in the local language under local law may be advisable for those assets — your UK solicitor and a local lawyer in each relevant jurisdiction should coordinate to ensure the wills do not conflict. Consider whether an international will (Hague Convention form) is appropriate.

Lasting Power of Attorney (LPA). Ensure both Property and Financial Affairs LPA and Health and Welfare LPA are in place and registered with the Office of the Public Guardian before departure. The equivalent documents in your destination country may need to be set up separately — their legal systems may not recognise a UK LPA.

Trust documents. If any trusts are in place, review the trust deed, confirm trustees are in place and actively managing, and ensure the trust is registered with HMRC's Trust Registration Service if required.

6. Protection Review for the Retirement Transition

Life insurance. Review all life insurance policies for residency clauses. Some UK policies void cover if the policyholder is resident abroad — check the terms carefully. Where a UK policy cannot be maintained after departure, arrange replacement international cover before leaving. If the policy is held in trust, ensure trustees are aware of the residency change.

International Private Medical Insurance (IPMI). UK residents in retirement typically rely on the NHS, topped up perhaps by private medical insurance. In retirement abroad, you will not have NHS access as a right (emergency treatment when visiting the UK is available; routine treatment is not). A comprehensive IPMI policy covering the countries where you will live and travel is essential. Set this up before departure — insurers are more willing to offer cover to individuals in good health than to those who apply after an issue has arisen.

Income protection. If you are still working in the years before retirement, income protection remains relevant. Review whether your existing cover is valid in the country you will be working in, and ensure it pays out for the period remaining until your intended retirement date.

7. UK Property: Sell, Let, or Keep?

The decision about UK property on departure is one of the most consequential and most commonly deferred.

Sell before departure. If you sell your UK main residence while it is still your main residence, Principal Private Residence (PPR) relief exempts the gain from CGT entirely (provided you have lived in it throughout ownership, broadly). Selling after becoming non-UK resident means PPR relief may not fully apply to gains accrued during non-residence. The tax saving from selling before departure rather than after can be substantial for properties with significant appreciation.

Let on departure. If you wish to retain the UK property as a rental investment, the Non-Resident Landlord (NRL) scheme allows UK rental income to be paid gross to overseas landlords, with the landlord self-assessing UK income tax on rental profits. The property remains subject to UK CGT on any eventual sale under the non-resident CGT rules (in force since April 2015 for residential property).

Retain as a future base. Some individuals wish to retain a UK property for returns during UK visits. This is a legitimate choice but has financial implications: the property's value may be included in the estate for IHT, the costs of maintaining and managing it reduce investment yield, and the CGT position on eventual sale may be complex.

The right answer depends on the property's value, the expected capital growth, your future plans for UK visits, and your overall asset allocation. Property advice from a specialist estate agent and tax advice from a specialist UK tax adviser should both be obtained before departure.

8. Investments and ISAs

ISA contributions stop on departure. You cannot make new ISA contributions once you are non-UK resident. If you have ISA capacity remaining in the tax year of your departure, consider using it fully before you leave. The existing ISA continues to grow tax-free after departure — preserve it as a tax-efficient vehicle for the retirement phase.

Offshore bond replaces the ISA. For new savings from the retirement phase onwards, the offshore bond takes the role previously played by the ISA: a tax-efficient wrapper for long-term investment. Ensure the offshore bond is established and funded before the ISA contributions stop.

Portfolio risk adjustment. The transition from accumulation to drawdown typically involves reducing portfolio risk. You no longer have employment income to absorb short-term losses; a sequence-of-returns risk (poor returns early in retirement significantly eroding the portfolio) is real. Begin the de-risking process in the pre-retirement window — not on the day of retirement — to avoid forced encashment of risk assets at an inconvenient time.

Building the Pre-Retirement Action Plan

The above eight areas translate into a practical action plan. Working backwards from a target retirement date, a typical pre-retirement timeline might look like:

• 3–5 years before: domicile and LTR analysis; SIPP vs QROPS decision; offshore bond establishment; check NI record and fill gaps if advisable
• 2–3 years before: DB transfer analysis if applicable; begin de-risking investment portfolio; update will and LPA; review protection policies; decide on property strategy
• 1–2 years before: apply for NT code if applicable; establish IPMI coverage; execute property decision (sell or arrange lettings management); ensure trust registrations are current
• 6–12 months before: final pension crystallisation timing decision; confirm offshore bond fully funded; complete legal document execution; arrange final payroll notification and employer pension closure

How Global Investments Can Help

Global Investments specialises in pre-retirement planning for internationally mobile high-net-worth clients. We take a whole-of-life approach — coordinating pension, investment, tax, protection, legal, and property decisions — and work with specialist advisers in the relevant jurisdictions to ensure every action is taken at the right time and in the right sequence. If your retirement is three to five years away, now is precisely the right time to start the conversation. Contact us to discuss your pre-retirement planning.