Malta QROPS—Benefits, Rules, and Tax Implications for UK Expats

In this guide, we’ll outline the rules for transferring your UK pension to a Malta QROPS. We’ll also explain how to move your pension to Malta and what advantages and tax implications you should be aware of before deciding on the transfer.

What Are the Rules for Transferring a UK Pension to a Malta QROPS?

If you wish to transfer your UK pension to a QROPS in Malta, the most important factor is that you are a resident of Malta and therefore avoid the Overseas Transfer charge (OTC) and whether or not your chosen scheme is approved by His Majesty’s Revenue and Customs (HMRC). The schemes included on the official HMRC QROPS list meet the recognised overseas pension scheme (ROPS) criteria, some of which are:

• Being based outside of the UK.
• Limiting the pension access age to 55.
• Allowing early withdrawals only in case of ill-health.
• An EU member state, Norway, Iceland, Liechtenstein, or a country (except New Zealand) with a double taxation agreement with the UK that includes arrangements for non-discrimination and the exchange of information.

Selecting an overseas scheme not included on HMRC’s approved list will result in a tax charge of up to 55% on the amount transferred to Malta—40% as an unauthorised payment and an additional 15% if the transferred amount exceeds 25% of the pension value.

Who Can Transfer a Pension to a QROPS in Malta?

There are no specific eligibility rules that apply solely to Maltese QROPS. However, you must meet the general qualification requirements for transferring a pension to a QROPS.

To be eligible, you must:

• Have a UK-registered pension scheme or an overseas pension that meets QROPS transfer requirements.
• Be a UK non-resident or planning to become one.
• Ensure your current pension provider permits transfers to a QROPS.

There is no legislative age limit on QROPS transfers, but individual schemes may impose restrictions.

Which UK Pension Can You Transfer to Malta?

You can transfer most private UK pensions to a Malta QROPS, including:

1. Defined benefit (DB) pension: Also known as a final salary pension, this provides guaranteed benefits based on salary and years of service. Transfers are subject to strict regulations, and advice from a UK-regulated adviser is required for transfers over £30,000.
2. Defined contribution (DC) pension: Workplace pensions where both you and your employer contribute to a pot, which is then invested to grow your retirement savings.
3. Small self-administered scheme (SSAS): A pension scheme typically used by company directors, small businesses, or family-run businesses to fund retirement.
4. Self-Invested personal pension (SIPP): A type of DC pension that allows greater flexibility in choosing investments, including stocks, bonds, and funds. SIPPs can be transferred to a QROPS if permitted by the scheme provider.

Meanwhile, you can’t transfer a UK state pension, an unfunded public sector pension, or an annuity you bought using your pension money.

Consult a financial adviser to ensure your pension can be transferred to Malta. Our experts at Titan Wealth International can help you evaluate your options and guide you through the transfer process, ensuring compliance with all relevant tax laws and regulations.

What Are the Tax Implications of Transferring Your Pension to a Maltese QROPS?

While the Maltese QROPS can be a tax-efficient pension option, before making a transfer, you should pay attention to:

1. The overseas transfer charge.
2. The ten-year rule.

The Overseas Transfer Charge

Malta has long been a popular QROPS jurisdiction, particularly before the Overseas Transfer Charge (OTC) was introduced in 2017.

It remains a key destination for those who transferred before this change and for individuals who meet the current OTC exemption criteria.

If you do not live in Malta, your UK pension transfer to a QROPS in Malta will be subject to the 25% overseas transfer charge (OTC).

Pension transfers to Malta used to be exempt from the OTC if you lived in the European Economic Area (EEA) at the time of the transfer. However, from 30 October 2024, the OTC exemption only applies if you transfer your pension to a QROPS located in a jurisdiction where you live.

So, if you live in Malta and transfer a UK pension to a Malta QROPS, you’ll be exempt from OTC—unless the total transfer value exceeds the overseas transfer allowance (OTA), which is set at £1,073,100. If your transfer exceeds the OTA, the excess sum will be subject to a 25% tax charge.

You may also be liable for OTC if you don’t submit the form APSS263 within 60 days of requesting a pension transfer to Malta.

The Ten-Year Rule

If you withdraw your pension funds within ten years of transferring them to Malta QROPS, you could be subject to UK income tax.

According to the ten-year rule, which replaced the five-year rule on 6 April 2017, you can take QROPS money free of UK tax 10 years after the day of the pension transfer, providing you are not UK resident when the payment is made and you have not been UK resident earlier in the tax year or in any of the 10 previous tax years.

According to the ten-year rule, which replaced the five-year rule on 6 April 2017, you can take QROPS money free of UK tax 10 years after the day of the pension transfer. Your pension provider must also report to HMRC any QROPS payments during that period, or you could face a 40–55% tax charge.

Is a QROPS in Malta Still a Popular UK Pension Transfer Option?

Historically, Malta was a popular choice for UK pension transfers, particularly before the Overseas Transfer Charge was introduced in 2017. However, due to recent rule changes, Malta is no longer a common choice for new transfers unless the individual is a tax resident in Malta.

For those residing outside Malta, transferring a UK pension to a QROPS in Malta is generally not tax-efficient due to the 25% OTC, unless an exemption applies.

In many cases, a self-invested personal pension may be a more suitable option for individuals seeking flexibility in their UK pension arrangements.

Tax Treatment of a QROPS in Malta

For those who are tax residents in Malta, a QROPS remains a viable pension option, as Malta offers a lower income tax structure compared to the UK.

When you start withdrawing pension income, taxation is based on Malta’s marginal income tax rates, which are generally lower than the UK’s 20% to 45% rates.

For 2024, Malta’s income tax brackets are as follows:

These rates apply after the pension commencement lump sum (PCLS) of 30% has been taken, which remains tax-free in Malta.

Malta is a popular pension transfer jurisdiction for UK expats due to its extensive network of double tax treaties, including one with the UK. However, the tax treatment of your pension will depend on the type of pension and your residency status.

Under the UK-Malta double taxation agreement (DTA):

• UK Government pensions (such as those from the NHS, civil service, police, or military) are only taxable in the UK, even if you are a tax resident in Malta.
• Private and workplace pensions transferred to a QROPS in Malta are typically taxable in Malta if you are a Maltese tax resident. The UK does not tax these pensions, avoiding double taxation.

What Are the Benefits of Moving Your Pension to a QROPS in Malta?

Moving your UK pension to a Malta QROPS comes with the following benefits:

• English as the Main Language: English is the official language of Malta along with Maltese. This means all QROPS provider information is in English, making Malta a suitable retirement location for UK expats.
• Strict Regulations: Malta is a member of the EU and is subject to stringent laws that secure pension transfers. Its tax authority, the Commissioner for Revenue (CFR), regulates the taxation of pension income, ensuring you’re taxed at the correct rate..
• Tax-Free Lump Sum Allowance: Moving your UK pension to a Maltese QROPS allows you to withdraw 30% of your pension pot as a tax-free lump sum once you turn 55. This only refers to the first £1,073,100 in your fund.
• Income Drawdown Option: When you gain access to your QROPS pot, you can choose to receive your pension as a drawdown. This means you can withdraw a part of your fund and leave the rest invested in bonds, mutual or index funds, real estate, or other appreciating assets.
• UK Inheritance Tax (IHT) Exception: Currently, transferring your UK pension to a QROPS in Malta can shield your pension from UK IHT, allowing you to pass on more wealth to your beneficiaries. However, proposed UK tax changes from April 2027 may impact long-term UK residents once you die, and it remains unclear whether QROPS will continue to be exempt from UK IHT in these cases.
• More Investment Options: Keeping your pension in a Maltese QROPS gives you access to diverse investment options like shares and cash deposits, helping you potentially increase your savings.

Is There a Malta QROPS for US Residents?

If you’re a US resident with a UK pension pot, transferring your UK pension to a QROPS in Malta is possible but not advisable. Because you reside outside of Malta, you’d be liable for the 25% overseas transfer charge.

Your QROPS funds would also be taxed as personal income in the US. According to the IRS, transfers to pension plans outside the US (and the UK) are treated as distributions subject to income tax.

How Can You Transfer Your UK Pension to a Malta QROPS?

If you decide to transfer your UK pension to a Malta QROPS, you need to take the following steps:

If you can’t find a QROPS that meets your retirement goals or aren’t a Malta resident, you can also move your UK pension to an international SIPP. International SIPP schemes allow simpler management of UK pensions abroad and are strictly regulated by UK authorities. They offer benefits similar to those of a QROPS but also provide more investment options, flexible access to your funds, and tax relief of up to 40% for higher-rate taxpayers (under certain conditions, such as having UK-sourced earnings).

Whether you choose a SIPP or QROPS, to make sure the transfer process goes smoothly, speak to a professional pension transfer adviser.

Optimise Your Pension with a QROPS Review

If you live in Malta and have a QROPS outside of Malta, or you’re planning to move to Malta and want to understand your pension options, recent rule changes may affect your financial planning.

At Titan Wealth International, our QROPS specialists will assess your pension structure, tax exposure, and retirement strategy. We help you determine if your existing QROPS remains suitable or if alternative solutions, such as an International SIPP, offer a more tax-efficient approach.

What’s Included in Your Complimentary Review?

• QROPS Suitability Assessment – Review your current QROPS and whether it still aligns with your retirement goals.
• Tax Impact Analysis – Understand the Overseas Transfer Charge (OTC) and potential tax liabilities.
• Alternative Pension Strategies – Explore International SIPPs and other tax-efficient retirement options.

With new regulations in place, making an informed decision is crucial to avoid unnecessary tax penalties.