Can You Transfer a UK Pension to Malaysia? Key Information for UK Expats

This guide explains whether transferring a UK pension to Malaysia is permitted under current HM Revenue & Customs (HMRC) rules, outlines the restrictions and tax implications, and introduces compliant alternatives for overseas pension management.

It also details how UK pension income is taxed in Malaysia, supporting UK expats in making informed, tax-efficient retirement decisions.

How Does Malaysia’s Pension System Work?

The fundamental pillar of Malaysia’s pension system is the Employee Provident Fund (EPF), a mandatory retirement savings scheme for individuals employed in the Malaysian private sector and certain categories of public-sector employees.

The EPF operates as a defined contribution scheme in which both employers and employees make regular contributions.

The combined contribution rate is typically 23% of an employee’s monthly salary, including a minimum of 12% from the employer and 11% from the employee. Once members reach 55, these rates are reduced to 6% for the employer and 5.5% for the employee.

EPF contributions are allocated toward three separate accounts:

Private pensions (such as private retirement schemes) aren’t common in Malaysia, and the country currently lacks incentives for developing this pillar.

Can You Transfer a UK Pension to Malaysia?

UK pension transfers to overseas schemes are only permitted if the receiving arrangement is recognised as a qualified recognised overseas pension scheme (QROPS) by HM Revenue & Customs (HMRC). QROPS are subject to stringent conditions that ensure compliance with UK pension legislation, including reporting requirements and benefit restrictions.

As of 2025, no Malaysian pension providers are listed on HMRC’s QROPS list, meaning direct transfers from the UK to a Malaysian scheme are not permitted without incurring substantial tax penalties. Malaysia does not currently operate pension vehicles that meet HMRC’s QROPS criteria.

Can You Transfer to a Non-QROPS in Malaysia?

HMRC treats any transfer to a non-QROPS as an unauthorised payment from your UK pension. This typically triggers a 40% tax charge, with an additional 15% surcharge if the transfer exceeds 25% of your pension value within a 12-month period.

Because Malaysian schemes do not qualify as QROPS, any direct pension transfer to Malaysia would be categorised as unauthorised—making it a highly tax-inefficient and non-compliant option.

Furthermore, non-QROPS schemes fall outside UK regulatory oversight. This means that UK pension bodies such as the Pensions Ombudsman cannot offer protection if the scheme is mismanaged or if funds are lost through poor investment choices.

The timing of your tax residency is a critical planning consideration. If you are still a UK resident when the transfer is made, the full unauthorised charge applies.

By contrast, structuring your move in coordination with compliant transfer options, such as an international SIPP, can mitigate unnecessary tax exposure and preserve pension value.

Can You Transfer a UK Pension to a QROPS Outside of Malaysia?

Although no QROPS are available in Malaysia, UK expats may consider transferring their pension to a QROPS based in a recognised jurisdiction, such as Malta or Germany.

These schemes are regulated under local pension rules but approved by HMRC to receive UK pension transfers without incurring unauthorised payment charges.

However, additional tax risks may still apply. If the QROPS is located in a jurisdiction where you are not a tax resident at the time of transfer, HMRC imposes a 25% overseas transfer charge (OTC) on the transferred amount.

This charge may be refunded if you become resident in the same country as your QROPS within five years of the transfer. However, this requires strict compliance and timely evidence submission to HMRC.

Given the complex cross-border tax implications, professional advice from a UK-regulated pension transfer specialist is strongly recommended before proceeding with any QROPS transfer.

What Is the Alternative to Transferring a UK Pension to Malaysia?

Since transferring your UK pension to a Malaysian plan is not feasible without tax charges and penalties, UK expats may consider consolidating their pension into an international self-invested personal pension (SIPP) as a more viable alternative.

International SIPPs are UK-registered, personal pension arrangements specifically designed for UK non-residents. They allow expats to grow, manage, and access their retirement savings from overseas while retaining UK tax benefits and the regulatory protection of the UK’s Financial Conduct Authority (FCA).

What Are the Advantages of International SIPPs?

The primary benefits of transferring your pension to an international SIPP are outlined in the table below:

What Are the Potential Drawbacks of International SIPPs?

When considering consolidating your UK pension into an international SIPP, it’s crucial to understand its potential drawbacks:

1. Tax relief limitations: Expats contributing to international SIPPs may be eligible for UK tax relief only if they still have taxable UK earnings or have been UK residents in one of the past five tax years, and were residents when they first joined the scheme. The amount eligible for tax relief is limited to 100% of relevant UK earnings or, in the absence of such earnings, up to £3,600 per tax year.
2. Regulatory complexity: International SIPPs are governed by complex rules regarding withdrawals, contributions, and investments that you must comply with to avoid penalties and tax charges. In addition to UK regulations, expats in Malaysia must also adhere to local legal and tax requirements. Professional, cross-border pension advice is highly recommended to ensure full regulatory compliance and informed decision-making.
3. Fees and charges: International SIPPs involve setup fees, administrative costs, and advisory charges that you must factor into your overall financial planning.

Which UK Pensions Can Be Consolidated Into an International SIPP?

There are two main types of UK pension schemes that are generally eligible for transfer to an international SIPP:

1. Defined benefit (final salary): These are traditional pension arrangements where the retirement income is determined by your final salary and years of service. DB pensions offer a guaranteed retirement income for life, with payments usually increasing annually in line with inflation.
2. Defined contribution: In these schemes, both you and your employer contribute a certain percentage of your salary to build a retirement fund. The contributions are invested in a range of assets such as shares, ETFs, and bonds. The value of your pension at retirement depends on the total contributions made and the fund’s investment performance.

If you wish to transfer a defined benefit pension to an international SIPP, consider the following:

• Private sector and funded public sector DB schemes are eligible for the transfer. It’s not possible to transfer unfunded public sector defined benefit schemes (such as those for police officers, NHS workers, or teachers).
• If the cash equivalent transfer value (CETV) of your DB pension exceeds £30,000, you are legally required to obtain regulated financial advice from a qualified pension transfer specialist. This ensures you fully understand the implications of transferring out of a DB pension.
• Transferring a DB pension results in the permanent loss of guaranteed benefits, and the transfer cannot be reversed.

When transferring a defined contribution pension to an international SIPP, you should be aware of the following:

• If you have a pension that includes special guarantees (such as a guaranteed annuity rate) whose value exceeds £30,000, you must consult a pension transfer specialist. This rule ensures you’re fully aware of the advantages and drawbacks of the transfer.
• You can choose between a cash or an in-specie transfer:
  • A cash transfer involves liquidating your DC assets and transferring the proceeds directly into an international SIPP.
  • An in-specie transfer allows you to move the existing investments directly into the international SIPP, provided the receiving scheme supports those specific options. This type of transfer may not be available for certain assets, such as lifestyle funds with a target retirement date.

How Are Foreign Pensions Taxed in Malaysia?

Malaysia operates a territorial taxation system, meaning only income sourced or received within Malaysia is generally subject to income tax—regardless of an individual’s residency status.

Historically, this meant that UK expats were not liable for Malaysian tax on foreign pension income, provided it remained outside Malaysia. However, changes introduced in 2022 adjusted the treatment of foreign-sourced income (FSI) for Malaysian tax residents.

Under transitional rules in effect until 31 December 2026, FSI that is remitted (i.e. brought into Malaysia) may be exempt from tax if it has already been taxed in its country of origin. There is no fixed minimum tax rate requirement, but Malaysian tax authorities require supporting documentation as evidence that foreign tax was paid.

According to the UK–Malaysia double taxation agreement, UK-sourced private pension income, including withdrawals from an international Self-Invested Personal Pension (SIPP), is taxable only in Malaysia when received by a Malaysian tax resident.

Because this income is not subject to UK income tax, it may not qualify for Malaysia’s temporary foreign income exemption unless accompanied by clear evidence that UK tax has been deducted at source.

If this income is remitted to Malaysia and does not meet the exemption criteria, it may be subject to Malaysian personal income tax at progressive rates of up to 30%, depending on your total assessable income.

By contrast, UK government pension income—such as that from unfunded public sector schemes—is usually taxable only in the UK under the terms of the DTA. The only exception applies if you are both a resident and a national of Malaysia, in which case such income becomes taxable in Malaysia instead.

Importantly, if you retain your pension income offshore—that is, you do not remit it into Malaysia—it typically remains outside the scope of Malaysian income tax under the territorial system.