Can You Transfer a UK Pension to Italy? Rules and Tax Implications for UK Expats

This guide explores whether it’s possible to transfer a UK pension to Italy under current HMRC rules, outlines alternative tax-efficient structures such as international self-invested personal pensions (SIPPs), and explains how UK pension income is taxed under Italian law. It is designed to help expats structure their retirement income in a compliant and efficient manner.

How Does the Italian Pension System Work?

The pension system in Italy is structured around two pillars:

1. Public pension: All employed individuals and their employers are required to contribute to Italy’s National Social Security Institute (INPS). The system operates on a pay-as-you-go basis, meaning that current contributions are used to fund the pensions of current retirees rather than being accumulated in individual accounts.
2. Private pensions: Participation in private pension schemes is voluntary and includes three primary types:
   • Closed pension funds: Available to employed individuals.
   • Open pension funds: Available to anyone regardless of employment.
   • Individual pension funds: Structured as life insurance contracts.

The standard retirement age in Italy is 67. In the UK, the minimum age to access most private pensions is currently 55 (scheduled to increase to 57 in 2028). The UK State Pension age is presently 66 and is set to gradually rise to 67 between 2026 and 2028.

Which UK Pensions Are Eligible for Transfer?

Certain UK pension schemes may only be transferred to specific types of pension arrangements, while others cannot be transferred abroad but can still be accessed from Italy.

The following types of UK pension schemes are eligible for transfer:

• Defined contribution schemes
• Private sector defined benefit schemes
• Funded public sector pension schemes (those supported by a central fund, such as the Local Government Pension Scheme)

Unfunded public sector pension schemes (those for firefighters, teachers, NHS workers, or police officers) are financed directly by the taxpayer and not supported by a central fund.

To prevent potential abuse, these schemes can be transferred only to another defined benefit pension scheme and cannot be transferred overseas.

The UK State Pension can’t be transferred to Italy or any other country. However, provided you’re eligible to receive the pension, you can arrange with the International Pension Centre for payments to be made directly into your Italian bank account.

To facilitate this, you will need to provide the following details:

1. International bank account number (IBAN)
2. Business identifier code (BIC)

Since Italy is a member of the European Economic Area (EEA), you’ll be eligible for yearly state pension increases.

Is a UK Pension Transfer to Italy Possible for UK Expats?

UK expats can transfer their pensions abroad only if the receiving scheme meets specific requirements defined by His Majesty’s Revenue and Customs (HMRC) and has earned the status of a qualifying recognised overseas pension scheme (QROPS). This designation confirms that the receiving scheme meets the following conditions:

1. Tax recognition test: The pension scheme must be officially registered with the Italian tax authorities and be available to Italian residents, not solely to individuals transferring their pensions from the UK or another country.
2. Regulatory requirements test: The receiving scheme must be regulated by a relevant pension scheme authority in Italy.
3. Pension age and benefits tax relief tests: The receiving scheme must not allow pension access to individuals under the age of 55, except under specific circumstances such as ill health. Any tax reliefs offered must apply universally, not just to non-residents.

HMRC maintains a list of recognised overseas pension schemes (ROPS) to which UK expats may transfer their pensions. All QROPS are ROPS that have met additional tests to be eligible for tax-efficient overseas transfers.

Presently, no Italian pension schemes meet the requirements to qualify as QROPS. HMRC updates its ROPS list twice a month (on the 1st and the 15th), and it’s possible that some Italian schemes may appear on it, but there are currently no indications of that.

Can You Transfer Your Pension to a QROPS Outside of Italy?

Until October 2024, QROPS rules allowed UK expats to transfer to any QROPS in the EEA or Gibraltar without incurring tax charges or penalties, provided they were residents of the UK, an EEA country, or Gibraltar at the time of the transfer.

However, regulatory updates introduced in 2024 significantly changed the QROPS framework and imposed restrictions on overseas pension transfers. If UK expats transfer their pensions to a country they’re not resident in, they’ll be subject to a 25% overseas transfer charge (OTC).

If you’re an Italian resident and you transfer your pension to a QROPS in Malta, Germany, or any other country with available QROPS, you’ll be liable for the 25% OTC.

You may apply for a refund of the 25% overseas transfer charge if you relocate to the country where the QROPS is based within five full tax years following the transfer.

Can You Transfer Your Pension to a Non-QROPS in Italy?

While transferring your UK pension to a non-QROPS in Italy is not illegal, it will trigger an unauthorised tax charge of 40%. If the total transferred amount within a 12-month period exceeds 25% of the pension fund’s value, an additional 15% surcharge may also apply.

In addition to losing a substantial portion of your retirement savings, transferring to a non-QROPS in Italy may have further consequences.

The receiving scheme in Italy may not be subject to regulatory oversight, which could expose you to high-risk investments and increase the likelihood of financial loss.

Additionally, transferring to a non-QROPS means losing the protection of HMRC. As a result, you may not be eligible for compensation and assistance through the Financial Services Compensation Scheme (FSCS) or the Pensions Ombudsman.

International SIPPs: A Valuable QROPS Alternative for UK Expats in Italy

Since transferring to a QROPS without incurring significant tax charges isn’t possible for UK expats in Italy, alternative pension transfer options may be considered, primarily the international SIPP.

Like regular SIPPs, international SIPPs are UK-based pension structures. The key difference is that the latter are designed specifically for UK expats and non-residents who intend to retire abroad.

They offer a UK-regulated pension vehicle that facilitates streamlined pension access, efficient management, and greater flexibility for individuals residing abroad.

Advantages of International SIPPs

Transferring a UK pension to a SIPP can be an appealing option for UK expats in Italy due to the following benefits:

How Can UK Expats in Italy Supplement Their Retirement Income?

Qualifying non-UK pension schemes (QNUPS) have been recognised by HMRC since 2010 but are classified as “unapproved” schemes. Unlike QROPS, they don’t offer certain UK tax benefits—for instance, QNUPS contributions are not eligible for UK tax relief.

A standard pension transfer to a qualifying non-UK pension scheme (QNUPS) isn’t a viable option for UK expats; HMRC would treat it as an authorised payment and consequently subject it to an unauthorised payment charge of up to 55%.

However, UK expats may still leverage a QNUPS to supplement their retirement savings, enhance long-term financial security, and maximise tax efficiency.

UK expats who decide to utilise QNUPS as a supplementary retirement savings vehicle may expect the following benefits:

Despite their advantages, QNUPS also entail several potential drawbacks:

• Complex regulations: As QNUPS are unapproved, they are not within the scope of HMRC reporting requirements. However, they are governed by regulations of the jurisdiction in which they were established, and a lack of compliance could trigger penalties.
• Fees: QNUPS can have high initial, administrative, and investment management fees.

How Are Foreign Pensions Taxed in Italy?

Your liability on pension income as an expat in Italy depends on your residency status for tax purposes. If you’re considered an Italian tax resident, you will be subject to income tax on your worldwide income, which includes foreign pensions such as international SIPPs.

The amount of personal income tax payable is calculated based on your total income and the applicable tax bands, as outlined in the table below:

Certain expenses may reduce your taxable income in Italy, such as:

• Charitable donations to non-profit organisations
• Qualified healthcare and education expenses
• Interest payments on mortgage loans

UK expats may benefit from Italy’s flat tax regime, which allows qualifying individuals to pay a 7% flat tax on foreign-sourced pension and other income for up to 10 years. To qualify for this regime, you must meet the following conditions:

1. You haven’t been an Italian tax resident for at least five of the previous ten tax years.
2. You hold a foreign pension.
3. You transfer your tax residency to a municipality in southern Italy with a population of less than 20,000 inhabitants.

To understand how Italy’s tax rules apply to your specific situation and to assess your eligibility for reliefs and the flat tax regime, it is recommended to consult a pension transfer adviser. Our experts at Titan Wealth International are well-versed in cross-border pension regulations and can help you optimise your retirement income while ensuring full compliance with applicable Italian tax laws.

UK-Italy Double Taxation Agreement

Since an international SIPP is a UK-based pension scheme, any income you receive from it may, in principle, be subject to taxation in both the UK (the income source country) and Italy (your country of residence).

However, the double taxation agreement (DTA) between the UK and Italy allocates taxing rights between the two countries to protect their tax residents from being taxed twice on the same income.

According to the DTA, pension income received from a UK scheme by an Italian tax resident may only be taxed in Italy. If any tax is withheld in the UK, you may claim relief through mechanisms such as tax credits and deductions.

Meanwhile, benefits from UK unfunded public sector pensions remain taxable solely in the UK, regardless of your tax residency status. The only exception applies to individuals who are both Italian nationals and residents, in which case the pension is taxable exclusively in Italy.

Declaring Your UK Pension in Italy

Italian tax residents are required to declare their annual worldwide assets and income (including foreign pensions) on appropriate tax return forms: Quadro RW for assets and Quadro RL for income.

As Italy has a progressive taxation system and the rate you’ll be subject to depends on the amount of your taxable income, you can utilise gross drawdowns via SIPP and the quadro RL to optimise tax planning.

For instance, by managing gross drawdowns from your SIPP in years when you anticipate lower income from other sources (such as investments or rental property), you may be able to keep your total taxable income within a lower tax bracket and reduce your overall liability.

Failing to declare your assets or income, filing the form after the deadline, or making a late payment may result in substantial penalties. These may include the full amount of tax due, late payment interest, and administrative fines.

If you qualify for Italy’s 7% flat-tax regime, you are exempt from declaring foreign income that falls under this regime, including foreign pensions. However, you must still file an annual tax return to confirm eligibility.