2.7 Pensions and International Moves

Most RetirePlan users will spend their retirement in the UK, but some will have worked abroad and built up overseas pension entitlements, or plan to retire to another country and want to understand what happens to their UK pension. This chapter covers both scenarios: moving a UK pension overseas, and bringing an overseas pension back to the UK.

These are genuinely complex areas - more so than most domestic pension questions - because you are dealing with the tax rules of two countries simultaneously, HMRC reporting requirements, and a narrower set of regulated schemes that can accept international transfers. For most people, regulated financial advice in both countries is not just recommended but essential.

Part A: Moving Your UK Pension Overseas

If you are planning to retire or live abroad, you have two main options for your UK pension: leave it in the UK and draw it from there, or transfer it to an overseas scheme. Neither option is straightforwardly better - the right answer depends on your destination country, the type of pension you have, and your personal tax position.

Option 1: Leave Your Pension in the UK

Leaving your pension with your UK provider is often the simpler choice, and for many people it is perfectly workable. Your existing provider continues to manage the pension, and when you are ready to draw it, income is paid in pounds and taxed as UK income in the normal way.

If you need your income in a different currency, many large banks offer foreign exchange accounts that can handle the conversion.

The main risks of this approach are currency-related:

Exchange fees may reduce the effective value of each payment.
Exchange rates fluctuate daily, so your income in local currency will vary - making budgeting less predictable.

Option 2: Transfer to an Overseas Scheme

Transferring your UK pension to an overseas scheme means your pension will be regulated in the destination country, income will be paid in local currency, and you will be taxed under that country's rules. This can simplify your financial life if you are settling permanently abroad - but it comes with important conditions and risks.

Key conditions of an overseas transfer

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Key conditions of an overseas transfer
You will not normally be able to access the pension before age 55 (rising to 57 from April 2028), unless early retirement is required due to poor health.
You may still owe UK Income Tax on pension income taken within five years of the transfer and within ten years of leaving the UK permanently.
The overseas scheme must report to HMRC for ten years after the transfer. If you break any rules - such as taking money before age 55 - UK tax of up to 55% and additional penalties may apply.
(Source: MoneyHelper

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Qualifying Recognised Overseas Pension Schemes (QROPS)

The overseas scheme you transfer to must be a Qualifying Recognised Overseas Pension Scheme - known as a QROPS. This means it has been recognised by HMRC as meeting certain criteria, including accepting transfers from UK registered pension schemes and operating under rules similar to UK schemes.

HMRC maintains a list of recognised overseas pension schemes on GOV.UK. Always verify that a scheme appears on this list before proceeding with a transfer.

The cost of transferring to a non-QROPS scheme
If you transfer your UK pension to an overseas scheme that is not a QROPS, the transfer is likely to be treated as an unauthorised payment. You could face a tax charge of up to 55% of the transferred amount, plus additional penalties.
Non-QROPS schemes also carry higher investment risk, are unlikely to be regulated, offer no compensation if things go wrong, and are more commonly associated with pension scams.
(Source: MoneyHelper)

Tax on the Transfer Itself: The Overseas Transfer Charge

Transferring to a QROPS is not automatically tax-free. Whether you pay UK tax on the transfer depends on your circumstances at the time:

Circumstances	Tax treatment
You live in the same country as the QROPS during the first five years	No overseas transfer charge
Your employer is providing the QROPS and sponsoring your move	No overseas transfer charge
Transfer amount within the Overseas Transfer Allowance (OTA) of £1,073,100	No charge on the amount within the OTA
Transfer amount exceeds the OTA	25% tax on the excess
Any other circumstances not covered above	25% overseas transfer charge on the full transfer amount - normally deducted automatically by the overseas scheme

If you paid the overseas transfer charge but then move to the country where your QROPS is based within five years, you may be able to claim a refund. A refund may also be available if the charge was applied incorrectly.

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Circumstances can change - and so can your tax bill
Even if your transfer qualifies as tax-free at the time it is made, a 25% charge can still be applied later if your circumstances change within five years - for example, if you move to a different country from the one where your QROPS is based, or transfer to another QROPS outside your country of residence.
(Source: MoneyHelper

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What to Check About the Overseas Scheme

Before committing to any overseas transfer, make sure you fully understand the new scheme:

How the scheme works and what flexibility itoffers.
How your money will be invested, and whether youcan choose your own investments.
All fees - including set-upand transfer charges, annual management fees, investment charges, and any feesto change your investments.
Whether the scheme offersany benefits that your UK pension currently has, such as guaranteed annuityrates. If it does not, you will lose those benefits by transferring.

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Getting Financial Advice for an Overseas Transfer

Given the complexity and the potential for significant, irreversible tax charges, We strongly recommend obtaining regulated financial advice both in the UK and in the country you are moving to before transferring any pension overseas.

Regulated advice is also a legal requirement if you want to transfer a pension that guarantees a retirement income - including all defined benefit pensions and some defined contribution pensions.

When finding an overseas adviser, check their fees (including whether they charge commission), qualifications, experience and regulatory status. Complaints about poor overseas advice must be made under the rules of that country, not the UK.

How to Transfer a UK Pension Overseas: Summary Steps

Step	Action
1	Consider whether leaving your pension in the UK might be the simpler and safer option.
2	Confirm the overseas scheme is a QROPS - check HMRC's published list on GOV.UK.
3	Understand fully how the overseas scheme works, its fees, and what benefits you might lose.
4	Check whether the overseas transfer charge will apply to your transfer and at what rate.
5	Obtain regulated financial advice in the UK and in the destination country.
6	Ask your current UK provider what information they need, whether fees apply, and how long the transfer will take. Complete any forms within 60 days. Allow for a process of several months.

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Part B: Transferring an Overseas Pension to the UK

If you have worked abroad and built up pension entitlements in another country, you may be able to transfer that overseas pension into a UK scheme. As with the outbound transfer, this is not always straightforward - and leaving the pension where it is may well be the right answer.

Can You Transfer an Overseas Pension to the UK?

Not all overseas pensions can be transferred. Before doing anything else, check:

Whether your existing overseas provider allows international transfers out.
Whether the UK scheme you want to transfer into accepts transfers from overseas - not all do.
Whether any minimum age applies in the source country. For example, Australian pensions generally cannot be transferred to the UK before you reach your 'preservation age', which is 60 for anyone born on or after 1 July 1964.
Whether your overseas pension is already paying out - if it is, you may find it difficult to locate a UK scheme that will accept the transfer and continue payments.

Option 1: Leave Your Overseas Pension Abroad

As with the outbound scenario, leaving the pension where it is can be a perfectly workable approach. Your income will be paid in the currency of the country where it is based, and you would use a foreign exchange account to convert it to pounds if needed.

The same currency risk applies: exchange fees and daily rate fluctuations mean you cannot know exactly how much sterling income each payment will produce.

Option 2: Transfer to a UK Scheme

If you bring an overseas pension into the UK, it will then be governed by UK pension rules. This means:

The money is tax-free while held within the UK pension.
From age 55 (rising to 57 from April 2028), you can normally take up to 25% as a tax-free lump sum, subject to your overall lump sum allowance of £268,275.
The remaining funds can be taken as drawdown income, used to purchase an annuity, or taken as further lump sums - with the taxable portion subject to UK income tax in the normal way.

Tax on an Inbound Transfer

Transferring an overseas pension into the UK does not usually trigger a UK tax charge. However, the country you are transferring from may apply its own charge - this varies by country and you will need to research the local rules or take advice in that country.

A notable example: transfers from US pension arrangements are commonly subject to a US tax charge. Always check the source country's rules before proceeding.

What to Check About the UK Scheme

Apply the same due diligence to the receiving UK scheme as you would to any pension transfer:

How the scheme works and what flexibility it offers for taking income.
How your money will be invested, and whether you can choose your own investment options.
All fees - including set-up, transfer, annual management and investment charges.
Whether the UK scheme offers equivalent benefits to your overseas scheme. If it does not, you will lose those benefits by moving.

Getting Financial Advice for an Inbound Transfer

As with an outbound transfer, We strongly recommend regulated financial advice both in the UK and in the country where the pension is currently held. Regulated advice is a legal requirement if you are transferring a pension that guarantees a retirement income.

The same principles apply when assessing an overseas adviser: check their fees, qualifications, experience and regulatory status. Poor overseas advice must be complained about under that country's rules.

How to Transfer an Overseas Pension to the UK: Summary Steps

Step	Action
1	Check whether your overseas provider allows international transfers out, and whether you have reached any minimum transfer age in that country.
2	Identify a UK scheme that accepts transfers in from overseas and understand how it works, its investment options and its fees.
3	Check whether the source country will apply any tax charge on the transfer, and research the local rules or take advice there.
4	Obtain regulated financial advice in the UK and in the source country - required if the pension guarantees a retirement income.
5	Ask your overseas provider what they need for the transfer, any fees payable, and how long it will take. Complete any forms they send. Allow for a process of several months.

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At a Glance: Key Differences Between the Two Scenarios

Question	UK pension going overseas / Overseas pension coming to UK
Can I just leave it where it is?	Yes - in both cases, leaving the pension in its current location is a valid option and avoids the complexity of an international transfer.
What is the main currency risk of leaving it?	Exchange rate fluctuations mean you cannot predict exactly how much income you will receive in your local currency after conversion.
Is the receiving scheme regulated?	UK pension going overseas: the overseas scheme must be a QROPS. Non-QROPS transfers can trigger a 55% tax charge. Overseas pension coming to UK: UK schemes are regulated by the FCA and The Pensions Regulator.
Is there a UK tax charge on the transfer?	UK pension going overseas: possibly - the overseas transfer charge of 25% may apply depending on your circumstances. Overseas pension coming to UK: not usually from the UK side, but the source country may apply its own charge.
Is financial advice required?	In both cases: strongly recommended, and legally required if the pension being transferred guarantees a retirement income (all DB pensions; some DC pensions).
How long does the transfer take?	Both directions: typically several months. Complete any forms from your provider promptly - usually within 60 days.

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A Note on International Pension Scams

International pension transfers are an area that attracts scammers. The combination of complex rules, unfamiliar overseas schemes and large sums of money makes them a frequent target. Be particularly cautious if:

You have been approached unsolicited about moving a pension overseas.
An overseas scheme is not on HMRC's QROPS list, or cannot be independently verified.
You are being offered unusually high returns or guaranteed investment performance.
You feel pressured to act quickly or are offered financial incentives to transfer.

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Your UK pension provider is required to carry out scam checks before processing any transfer request and can stop or delay a transfer if they have concerns. A MoneyHelper Pension Safeguarding Guidance appointment - free and government-backed - is available if your provider flags concerns (see Chapter 2.6).

Using the RetirePlan Finance Planner

If you have an overseas pension that you plan to leave abroad, you can still include an estimate of the income it will provide in the Finance Planner's Other Income module - using a converted sterling estimate based on current exchange rates. This gives you a realistic overall picture of your retirement income, even if one element involves currency conversion.

Because international pension situations vary so widely by country and individual circumstance, the guidance in this chapter is necessarily introductory. If you have an overseas pension question as a RetirePlan Premium member, the Ask The Expert service can provide general rules-based guidance and help you identify the right questions to take to a specialist adviser.

RetirePlan Adviser Search
International pension transfers require specialist expertise - not all UK financial advisers have experience in this area. The RetirePlan Adviser Search can help you find a regulated adviser, and we recommend specifically asking about their experience with international transfers before engaging.

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Sources used in this chapter: MoneyHelper (UK Government) - Crown copyright, Open Government Licence v3.0.

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