Transferring Your UK Pension Abroad

May 30, 2025

Multi genreation family of expats walking along a beach

Moving Your UK Pension Overseas – What You Need to Consider

If you’re planning to retire abroad, the idea of moving your UK pension with you might feel like a logical next step. But as with most things involving pensions and tax, the reality is a little more complex.

Transferring a UK pension to an overseas scheme can come with real benefits – like improved tax treatment, more investment choice, and better alignment with your future income needs. But it also carries risks, especially if the transfer isn’t done correctly.

That’s where QROPS comes in.

expat couple transferring their uK pension.

What Is a QROPS?

A Qualifying Recognised Overseas Pension Scheme, or QROPS, is a pension scheme based outside the UK that meets certain standards set by HMRC. If you’re eligible, transferring your UK pension into a QROPS can allow you to:

  • Avoid some UK taxes on your pension income
  • Access a wider range of investments
  • Align your retirement plan with the country you intend to live in
  • Potentially pass on your pension free of UK inheritance tax

But not all QROPS are equal – and making the wrong move can trigger heavy tax charges.

Tax Transfer Charges and the 25% Rule

In most cases, transferring a pension to a QROPS will incur a 25 percent Overseas Transfer Charge (OTC). However, you might be exempt if:

  • You live in the country where the QROPS is based
  • Your employer provides the QROPS
  • You are resident in the UK, Gibraltar or another country in the EEA and the QROPS is also located there

Failing to meet these criteria could mean your transfer is subject to the full 25 percent charge. And if you transfer your pension to a scheme that isn’t recognised as a QROPS, you could face an unauthorised payment tax of up to 55 percent.

The 10-Year Rule

Any transfer made on or after 6 April 2017 will be subject to a 10-year reporting rule. That means the scheme must report payments and withdrawals to HMRC for 10 years – even if you’ve already left the UK. If you take money out before the age of 55 or breach the QROPS rules, tax charges may apply.

Currency Risk and Double Taxation

Even once you’ve transferred your pension, there are still important considerations:

  • Exchange rate risk – Your income may still be paid in GBP, even if you’re spending in another currency. If the pound fluctuates, so does your income.
  • Double taxation – Depending on where you live, you could be taxed both in the UK and locally. However, the UK has double taxation agreements with many countries, which can reduce or eliminate this risk.

It’s also worth noting that some countries treat QROPS withdrawals more favourably than others, so checking your country’s tax treatment before transferring is essential.

Upcoming Changes: Inheritance Tax on Pensions from 2027

From 6 April 2027, significant changes to inheritance tax (IHT) rules will come into effect. Currently, most unused pension funds are excluded from IHT calculations. However, under the new rules, unused pension funds and death benefits will be included in the value of your estate for IHT purposes. This means that if your total estate, including pension assets, exceeds the IHT threshold (currently £325,000, or up to £500,000 if passing your home to direct descendants), the excess could be taxed at 40% .

Furthermore, if you die aged 75 or over, your beneficiaries may face a double tax charge: IHT at 40% on the pension value and income tax at their marginal rate on withdrawals, potentially leading to a combined tax rate of up to 67%.

These changes underscore the importance of proactive estate planning, especially for expats considering pension transfers.

What to Avoid

  • Transferring to a non-QROPS: Doing so can result in a significant unauthorised tax charge.
  • Not understanding your tax obligations: You must be clear on how your pension will be taxed both in the UK and in your country of residence.
  • Skipping advice: Pension transfers are complex and irreversible – you should always get professional advice before making a move.

So, Should You Transfer your pension?

It depends on your location, retirement goals, time horizon, and what other pensions or assets you hold. A QROPS can make sense – but only if the numbers add up and you’re fully clear on the implications.

Thinking of transferring your pension?

Before you move anything, take our free Financial Health Check. In just 15 minutes, we’ll give you a full picture of your current finances and how a QROPS might (or might not) fit into your wider retirement plan.

About Three Sixty Financial

We help British expats across Asia plan smarter retirements. Whether you’re weighing up a QROPS, managing pension pots from previous employers, or just want to get clearer on your options – our advisers offer impartial, fee-based advice to help you move forward with confidence.

 

Next Steps: Stay Informed

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