QROPS Overseas Transfer Charge—A Detailed Guide & Overview of Pension Transfer Rules

In this guide, we’ll explain the QROPS overseas transfer charge and how it may impact your pension transfer. We’ll also provide information on the QROPS lifetime allowance, reporting requirements, costs, and rules to help you avoid any unforeseen complications if you choose to transfer your pension abroad.

What Is the QROPS Overseas Transfer Charge?

Introduced on 9 March 2017, the Overseas Transfer Charge (OTC) is a 25% tax on certain pension transfers from the UK to a Qualifying Recognised Overseas Pension Scheme (QROPS).

You’ll be exempt from the 25% charge if both of the following apply at the time of the transfer:

• The QROPS is based in your country of residence (or in the same country as your employer, in some cases), and
• You are a tax resident in that same country or jurisdiction.

However, the 25% OTC will apply if:

• You are not a resident in the same country as the QROPS, and
• No exemption criteria are met.

Additionally, HMRC can reassess the charge within five full tax years following the transfer. If your circumstances change, for example, you move to or from the country where the QROPS is based, the charge may become payable or refundable.

To manage this, you must submit the correct HMRC forms:

• Form APSS241: Used if your situation changes within five tax years and you need to report a change in residency that affects your OTC liability. This form can result in:
  • A refund of the OTC if you move to the country where your QROPS is based, or
  • A retroactive 25% charge if you leave the QROPS jurisdiction.
• Form APSS263: Completed when requesting a QROPS transfer, declaring your eligibility for an OTC exemption. It must be submitted to the scheme administrator within 60 days of the transfer request. If not submitted in time, the transfer will be taxed at 25% by default.

Who Is Liable for the Overseas Transfer Charge?

Liability for the Overseas Transfer Charge (OTC) depends on the type of transfer and the timing or circumstances in which the charge arises. According to HMRC QROPS rules, responsibility may be shared between parties involved in the transfer.

Speaking with a qualified pension transfer adviser is essential to assess OTC exposure, especially if your circumstances may change in the coming years.

Titan Wealth International can help you determine whether your QROPS is correctly structured and performing efficiently, factoring in fees, investment growth, and future mobility.

Who Is Exempt From the Overseas Transfer Charge?

You will be exempt from paying the OTC if:

• You live in the country where your QROPS is based.
• The QROPS is an occupational pension scheme provided by the member’s employer.
• The transfer is made to a public service pension scheme

Before 30 October 2024, you weren’t liable for the OTC if you lived in the UK or the European Economic Area (EEA) and transferred your pension to a QROPS in the EEA or Gibraltar.

This exclusion was removed to stop residents of the EEA from being able to transfer their pension to another EEA jurisdiction in which they were not a resident. However, you can still claim the exemption if the transfer was requested by 30 October 2024 and is finalised by 30 April 2025.

What Is the QROPS Lifetime Allowance?

The lifetime allowance (LTA) represented the maximum threshold of £1,073,100 that your pension pot could contain without incurring tax charges. The LTA is often confused with the annual allowance—the maximum amount you can contribute to a pension pot in a year.

On 6 April 2024, the LTA was abolished and replaced by:

What Are the QROPS Reporting Requirements?

When you make a QROPS transfer request, the scheme administrator has 30 days to inform you of the information and acknowledgements you need. Once they do, you have 60 days to complete and provide the necessary forms.

The administrator of the scheme you’re transferring overseas will require you to report:

1. Personal information: Includes your name and date of birth, national insurance number, principal residential address, the date you stopped being a UK resident (if applicable), and your phone number
2. QROPS details: Typically refers to the QROPS’s name and address, the country that regulates it, and the scheme’s HMRC reference number
3. OTC liability information: Details related to whether your QROPS is set up by your employer, like the employer’s name and address, which allows the scheme administrator to decide if the scheme is liable for OTC

You must also sign a written statement confirming you’re aware that transferring your pension to a QROPS may lead to:

• Overseas transfer charges in certain scenarios
• Exemption from OTC depending on specific circumstances
• Unauthorised payments charge if you transfer funds to a non-QROPS scheme

The same information should be reported if you’re transferring a pension from a QROPS or a former QROPS. However, in this case, you may also have to report additional information if the funds you’re transferring include a ring-fenced transfer fund—transferred funds that had a UK tax relief.

What Is the HMRC QROPS 5-Year Rule?

Under the five-year rule, expats repatriating back to the UK within five years of the QROPS transfer may have to pay UK tax on their pension. However, this only applies if you transferred your pension to a QROPS before 6 April 2017.

After this date, the five-year rule was extended to 10 years. This means that if you return to the UK within 10 years of the transfer, you may be subject to UK taxation.

Under the HMRC QROPS reporting requirements after 6 April 2017, your QROPS provider has to report any unauthorised withdrawals to HMRC and other relevant authorities.

If you make an unauthorised withdrawal—for example, by withdrawing funds out of a QROPS before turning 55—you may incur a tax charge of a minimum of 40% of the withdrawn amount. You may be charged an additional 15% if the amount you withdraw exceeds 25% of your pension value.

Can I Transfer a QROPS Back to the UK?

You can transfer a QROPS back to the UK, but only to an HMRC-recognised pension scheme. The most common UK pension scheme for expats is a self-invested personal pension (SIPP) since it offers a wide range of investment options, lower fees, as well as contribution and withdrawal flexibility.

Before you transfer your QROPS back to the UK, make sure to familiarise yourself with the potential transfer fees both the QROPS and your new pension scheme may include.

Some QROPS providers charge exit fees when transferring your pension to the UK, depending on the QROPS jurisdiction. These fees can be as high as £3,000 if you exit a QROPS in the first five years of setting it up—or £1,000 if you exit it six or more years after the establishment.

What Are the Typical QROPS Fees?

In addition to the potential QROPS overseas transfer charge of 25%, QROPS usually include set-up charges, annual fees, and investment fees that vary depending on the jurisdiction.

Malta, Gibraltar, and the Isle of Man used to be popular QROPS locations for UK expats However, since October 2024, you’re only exempt from OTC if you transfer a UK pension to a QROPS in your country of residence.

QROPS in these areas typically include the following fees:

1. Set-up and annual fees: Ranging from £800 to £3,000 a year
2. Investment platform fees: Around 0.4% per year
3. Underlying investment fees: Ranging from 0.5% to 1% annually

If your QROPS fees seem high, a professional pension adviser can help restructure your QROPS or suggest transferring your pension to a QROPS with more favourable tax benefits.