UK Pension Transfer to Germany: Everything You Should Know

However, the process is governed by complex UK and German tax regulations, and may trigger tax liabilities in one or both jurisdictions if not managed correctly.

This UK pension transfer to Germany article outlines the tax and regulatory considerations, and identifies potential strategies for structuring your pension in a tax-efficient manner aligned with your retirement objectives as a UK expat retiring in Germany.

How Does the German Pension System Work?

Germany has a three-pillar pension system:

1. Mandatory state pensions
2. Occupational pensions
3. Private pensions

The statutory retirement age is currently 66 years and 2 months for individuals born in 1959, and it will increase incrementally to 67 by 2031.

Mandatory State Pensions

In Germany, a mandatory state pension (Gesetzliche Rentenversicherung) covers the majority of employees. Both employees and employers contribute to the pension, and the fund finances current pensioners.

The value of the state pension benefits depends on factors such as:

• Level of income
• Number of contribution years
• Retirement age

Although the legal retirement age in Germany is currently 66, individuals who have made contributions to the state pension fund for at least 35 years can retire earlier. In such circumstances, the number of months they have left until their legal retirement age will be deducted from their state pension entitlement. For each year of earlier retirement, 3.6% will be taken from the pension.

Occupational Pensions

Occupational pensions are designed to supplement the state pension and are financed by the employer, employee, or both. This pension plan isn’t mandatory, and not every German employer offers it.

Occupational pensions are funded from your gross income and taxed in retirement. The taxable portion of the pension is determined by factors such as the year when the pension begins and the available pension allowance.

In many cases, individuals with occupational pensions are required to pay social security in retirement.

Private Pensions

Expats who would like to secure an additional retirement income stream often opt for private pensions. These pension investment plans can be set up through banks or insurance providers.

Private pensions offer more investment freedom and allow individuals to create a more personalised retirement strategy by defining the amount and frequency of contributions. The two prevalent private pension schemes in Germany are:

1. Riester: This is a government-sponsored pension scheme that can include insurance policies, unit trust agreements, savings plans, and home loan contracts. The Riester pension offers benefits such as government bonuses, tax deductions, and payout flexibility.
2. Rürup: This private pension plan is designed for self-employed individuals, high-earning employees, and freelancers. Although not as beneficial for individuals outside of these categories, Rürup schemes can also supplement existing retirement income. This pension type offers tax advantages, flexible contributions, and asset protection.

Can Every UK Pension Be Moved to Germany?

Not every UK pension can be transferred to Germany. Unfunded public sector pension schemes, such as the Teachers’ Pension Scheme and the NHS Pension Scheme, can’t be transferred to Germany—they can only be moved to another UK-based defined benefit plan.

Private sector defined benefit pensions, funded public sector pension schemes, and defined contribution plans are generally eligible for transfer from the UK to Germany.

However, there are several rules that apply when transferring your UK pension, depending on its type:

A UK state pension can’t be transferred out of the country. If eligible, you can claim your UK state pension in Germany and have it deposited into a German bank account.

How Can You Transfer a UK Pension to Germany?

The two most suitable options for UK expats who plan to transfer their pensions to Germany are:

1. Qualifying recognised overseas pension scheme (QROPS)
2. International self-invested pension plan (international SIPP)

QROPS

A QROPS is an overseas pension scheme that meets the requirements set by His Majesty’s Revenue and Customs (HMRC). It complies with all regulatory requirements of the UK and the jurisdiction where it is based, and it guarantees a secure and tax-free transfer abroad.

To be classified as a QROPS, an overseas pension scheme must meet specific criteria that align with those of UK pension schemes. For instance, access to pension benefits is generally restricted until the normal minimum pension age (NMPA) of 55, which will increase to 57 on 6 April 2028. Early access is only permitted in cases of ill health or specific protected rights.

Pension providers who are confident that their schemes comply with all HMRC’s conditions can request to be included on the list of recognised overseas pension schemes (ROPS). Germany currently has six pension schemes on the ROPS list:

1. ALTE LEIPZIGER Lebensversicherung auf Gegenseitigkeit.
2. Condor Lebensversicherungs-AG Basis-Rente.
3. Condor Lebensversicherungs-AG Sofort-Rente.
4. New Pension Scheme of the European Patent Office.
5. Versorgungswerk Architektenkammer Baden-Wurttemberg.
6. Versorgungswerk Der Architektenkammer Sachsen.

The QROPS list is updated twice a month, which means that more German schemes may be added in the future.

Before initiating a transfer, always verify the status of the receiving scheme on HMRC’s official Recognised Overseas Pension Schemes (ROPS) Notification List, as schemes may be added or removed without notice.

QROPS Advantages & Drawbacks

Transferring your UK pension to a QROPS can offer the following benefits:

The potential drawbacks of a QROPS include:

• Loss of benefits: By moving to a QROPS, you may lose a portion of the benefits offered by the previous pension scheme.
• High fees: The majority of QROPS allow non-standard share classes, which typically include commissions payable to advisers ranging from 2% to 5%. These fees can make holding the same investments in a QROPS more expensive than holding them in a pension vehicle that allows only clean share classes (such as an international SIPP).

QROPS Rules

If you’re planning on transferring your UK pension to a QROPS, consider the following rules:

1. Since 6 April 2025, transfers to a QROPS – even within the EEA, including Germany – may be subject to a 25% overseas transfer charge unless you are a tax resident in the same country where the QROPS is based at the time of transfer and for the following five years. Moving abroad after the transfer may trigger the charge retrospectively.
2. You’re eligible for an overseas transfer allowance of £1,073,100. You’ll be subject to a 25% tax charge on the excess amount.
3. Your QROPS scheme has a 10-year reporting requirement to HMRC. Any breach during this period (such as withdrawing before the age of 55) will be reported and could trigger a tax charge of up to 55%.
4. You must be a non-UK tax resident for 10 consecutive full tax years to withdraw funds from a QROPS without UK tax liability. Any withdrawals made before this period may trigger UK income tax charges.
5. You could be liable for UK tax if you withdraw money from your QROPS during the first five years of the transfer, even if you’re a UK non-resident for tax purposes.
6. If you transfer your pension to a scheme that isn’t on the QROPS list, you’ll be liable for an unauthorised tax charge of up to 55%.

International SIPP

International SIPPs are regulated by the Financial Conduct Authority (FCA), giving UK expats the opportunity to keep their pension under UK regulatory protection while gaining access to advantages that aren’t typically available with standard pension plans.

Some of the benefits you can gain by transferring your pension to an international SIPP include:

• International investment options: International SIPPs allow you to invest in a broad range of UK and international assets in the desired currency, which enables you to diversify your portfolio and reduce the impact of market fluctuations.
• Simple pension consolidation: International SIPPs allow you to consolidate multiple pension pots into one, streamlining your pension planning and management.
• Tax relief: International SIPP contributions qualify for tax relief if you have relevant UK earnings or meet specific residency criteria. Depending on the double taxation agreement in place, they also offer increased tax efficiency in your country of residence.
• Flexible withdrawals: International SIPPs offer flexi-access drawdown (FAD), allowing you to withdraw any percentage of your funds once you reach retirement age.
• Easy currency management: Depending on your investment strategy and the chosen international SIPP, you can invest solely in multiple currencies.
• Option to transfer to a QROPS: In some circumstances, it’s possible to transfer an international SIPP to a QROPS for more flexibility and tax advantages.

The Drawbacks of an International SIPP

While international SIPPs offer numerous benefits, there are certain risks you should consider:

• Fees: Fees for international SIPPs have reduced over time. However, transferring your scheme to an international pension still requires you to cover the cost of setup, administration, and pension transfer advice.
• Tax implications: Understanding the tax implications of holding an international SIPP is essential, as your country of residence may not recognise all the pension benefits you expect to receive.
• Tax relief limits: You may generally contribute up to £60,000 per year without incurring income tax liability. However, your eligibility for tax relief on contributions will depend on having relevant UK earnings or meeting residency conditions. The relief at source limit for UK expats without relevant UK earnings is £3,600 per year.

How Can UK Expats Save More Toward Retirement While Living in Germany?

If you exceed the annual pension allowance or wish to make additional pension contributions, a qualifying non-UK pension scheme (QNUPS) can be an effective method for optimising your pension planning strategy.

A QNUPS is an unapproved non-UK pension scheme—HMRC recognises it, but some of the tax benefits attached to approved pension schemes don’t apply to a QNUPS. For instance, contributions to a QNUPS aren’t eligible for tax relief. Additionally, QNUPS are governed by strict rules, and failure to adhere to them could result in significant tax penalties.

Note that QNUPS contributions and withdrawals don’t need to be reported to HMRC. Furthermore, assets in a QNUPS are protected from certain legal claims, such as those that may arise from divorce proceedings or creditor claims.

Taxation of Pensions in Germany

If you’re a German tax resident, you’ll be liable for tax on your worldwide income, including pensions. Germany operates a progressive tax system, and your tax obligations depend on your total taxable income:

As a UK expat, you may also be exposed to the UK tax if:

1. You receive your pension from a UK provider
2. You’re classified as a UK resident for tax purposes

To avoid paying tax on the same income in two jurisdictions, you can utilise the double tax treaty between the UK and Germany. The treaty’s provisions state that:

• Your pension is subject to tax in your country of residence.
• Your UK unfunded public sector pension is taxed in the UK. However, your foreign income will be included when calculating your average tax rate in Germany.