Transferring a UK pension abroad can be a tax-efficient way to save for retirement while living outside the UK. However, not all overseas pension schemes offer the same benefits, meaning some may be more suitable for your financial needs than others.
In this comprehensive guide, we explain what offshore pension plans for expats are, identify which UK pensions are eligible for overseas transfer, and outline the key advantages and limitations of each option.
What You Will Learn
- What does an offshore pension plan for expats refer to?
- Which UK pensions can you transfer abroad?
- Which offshore pension plans can UK expats contribute to?
- What are the advantages and disadvantages of contributing to an offshore pension plan?
What Is an Offshore Pension Plan for Expats?
Offshore pension plans, often referred to as overseas pension schemes, are personal retirement savings plans based outside the UK. These schemes typically:
- Offer tax advantages, depending on the jurisdiction
- Provide access to a wide range of global investment options
- Accept contributions from multiple jurisdictions
- Allow withdrawals in the local currency
Historically, expats have transferred their UK pensions to offshore plans in the jurisdictions where they reside. This approach can simplify the management of retirement savings and provide access to funds in the appropriate currency.
Which Offshore Pension Plans Are Suitable for Expat Pension Contributions?
If you decide to transfer your UK pension abroad and start contributing to an offshore pension plan for expats, you have the following options:
(Note: Not all of these schemes accept direct UK pension transfers without tax consequences. Some may trigger unauthorised payment charges if not structured correctly.)
- Qualifying recognised overseas pension scheme (QROPS)
- Qualifying non-UK pension scheme (QNUPS)
- International private pension plan
Qualifying Recognised Overseas Pension Scheme (QROPS)
QROPS are pension schemes based in jurisdictions outside the UK and suitable for those who want to retire abroad. They comply with His Majesty’s Revenue and Customs (HMRC) requirements and are on the official QROPS list. To qualify, a foreign pension scheme must be considered a recognised overseas pension scheme (ROPS), meaning it must:
- Be registered as a pension scheme for tax purposes in the jurisdiction where it is established.
- Be regulated by a pension authority in that jurisdiction.
- Comply with HMRC’s minimum pension age (currently 55, increasing to 57 in 2028).
- Allow early withdrawals only in cases of ill health or early retirement professions such as military service or elite athletics.
To transfer a UK pension to a QROPS, you must be under the age of 75. You do not have to be a UK non-resident, but your residency will determine whether the transfer is subject to the 25% Overseas Transfer Charge.
If you move abroad within 12 months of the transfer, exemptions may apply. Your QROPS provider is required to report any payments to HMRC for 10 full UK tax years after the transfer, and HMRC may apply tax charges depending on your residency during that period.
If you transfer your UK pension to a QROPS, one benefit (available until April 2027) is the ability to withdraw up to 25% or 30% of your pension tax-free, depending on the jurisdiction. Your pension fund may also be exempt from UK Inheritance Tax (IHT), and you gain access to broader investment options.
QROPS may remain outside the scope of UK inheritance tax after 6 April 2027. However, HMRC has not yet issued definitive guidance on this point, and the treatment could differ for long-term UK residents compared with those who are non-resident. The rules remain subject to clarification.
However, potential costs should be carefully considered before proceeding. A 25% overseas transfer charge (OTC) applies if your QROPS is not based in your country of residence at the time of transfer, or if the value of your pension transfer exceeds the overseas transfer allowance (OTA), currently set at £1,073,100.
The 25% charge would apply only to the portion exceeding the allowance. This allowance may be reduced if you have previously accessed benefits or held a protected pension entitlement prior to 6 April 2024.
QROPS also carry strict HMRC reporting requirements, so speaking to a financial adviser can help ensure compliance and assess suitability before initiating a transfer.
Qualifying Non-UK Pension Scheme (QNUPS)
QNUPS are tax-efficient pension schemes located outside of the UK that allow expats to make investments overseas. They were introduced by HMRC in 2010 and are popular among expats who have already maximised their UK pension contributions.
You can establish a QNUPS in major financial jurisdictions, including:
- Guernsey.
- Malta.
- The Isle of Man.
Key benefits of QNUPS include:
- Exemption from UK IHT and capital gains tax (until April 2027).
- Access to your funds when you turn 50 (in Malta) or 55 (in Guernsey).
- A tax-free lump sum of 25–30%.
- No formal contribution limits (although contributions are not tax-relieved).
- No HMRC reporting requirements.
- Integration of life insurance policies such as Universal Life Insurance (ULI) or Indexed Universal Life (IUL) to support tax-efficient wealth accumulation.
You may only transfer a UK pension to a QNUPS if it holds a QROPS status. If it does not, you may face an unauthorised payment charge of up to 55%. Therefore, QNUPS are generally more appropriate for holding additional savings and international investments rather than transferring UK pensions directly.
Note: From 6 April 2027, QNUPS will generally lose their UK IHT exemption. This limits their effectiveness as an estate planning tool for UK-domiciled individuals. However, expats with long-term non-UK residency or complex domicile positions may still benefit from limited IHT mitigation. Specialist tax advice is strongly recommended.
International Private Pension Plan
International private pension plans (IPPPs) were developed for employees of multinational companies who can’t benefit from standard pension plans because they require worldwide mobility. Today, they are also used by expats seeking flexible, international retirement solutions.
IPPPs offer several advantages:
- Lump-sum payments.
- No restrictions on investments .
- No cap on pension benefits.
However, IPPPs are not recognised destinations for direct UK pension transfers under HMRC rules. Attempting to transfer a UK pension into an IPPP may trigger unauthorised payment charges of up to 55%, unless the structure also qualifies as a QROPS, which is rarely feasible in practice.
While some expats consider IPPPs in the absence of better local alternatives, they are generally unsuitable for receiving direct UK pension transfers. Specialist advice is strongly recommended before considering this route.
Important Note (2027 IHT Reform):
The UK government’s upcoming changes to Inheritance Tax (IHT), effective from 6 April 2027, will not impact all offshore pensions equally. While QNUPS and UK-based SIPPs will generally fall within UK IHT scope, QROPS that continue to meet HMRC requirements are currently expected to remain outside of UK IHT, based on published guidance. However, as some QROPS may also qualify as QNUPS structurally, treatment could vary depending on scheme structure and individual circumstances. Expats should review their estate plans with a specialist adviser to ensure continued tax efficiency.
Is an International SIPP a Better Option for Expats?
International SIPPs are pension plans designed for expats and non-UK residents who live abroad but want to continue managing their UK retirement savings. While QROPS are more suitable for expats planning to retire abroad permanently, international SIPPs are often better suited to individuals who retain UK ties or plan to return in the future.
Although tailored for expats, international SIPPs remain UK-registered schemes and are regulated by the UK’s Financial Conduct Authority (FCA). They allow the transfer of UK pensions into a structure that supports global investments, including equities, bonds, and funds, while maintaining UK pension protections.
International SIPPs offer several key benefits, including:
- Flexi-access drawdown options.
- Wide investment opportunities.
- Multi-currency investment and withdrawal capabilities.
- Tax-free growth within the pension wrapper.
- Typically lower transfer and management fees compared to QROPS.
It is important to note that QROPS rules vary by jurisdiction. While QROPS are exempt from UK Inheritance Tax (IHT), they may be subject to local succession or estate taxes. In contrast, international SIPPs are governed solely by UK tax law.
Note: From 6 April 2027, international SIPPs (like all UK-registered pensions) will no longer be exempt from UK inheritance tax. This change means any remaining pension value at death may be included in your taxable estate. While SIPPs remain a flexible and cost-efficient option for many expats, they will no longer serve as an effective tool for IHT mitigation. If you are considering transferring your UK pension to an international SIPP, Titan Wealth International offers tailored assessments and guidance to help you align your pension structure with your long-term retirement and estate planning goals
Which UK Pensions Can I Move Abroad?
The following types of UK pensions you can move abroad, subject to scheme rules and regulatory approval:
| Defined Contribution (DC) Pension | It’s a personal pension plan you or your employer can contribute to. Your provider invests the money held in a DC in various assets to grow your pension pot. |
| Defined Benefit (DB) Pension | Also known as final salary, a DB pension is a traditional workplace pension that provides regular income when you retire. Some defined benefit pensions, like the Teachers’ Pension Scheme or the NHS Pension Scheme, can’t be transferred abroad. |
| Free Standing Additional Voluntary Contribution (FSAVC) | This is a pension scheme private providers offer to let you make additional contributions to your retirement pot alongside your occupational pension. |
| Small Self-Administered Pension Schemes (SSAS) | These schemes are designed for private and family-run businesses. They offer retirement benefits to a company’s owner, directors, senior staff, and their family members working for the company. |
If you later return to the UK, it is typically possible to transfer your pension from a QROPS back into an international or UK-based SIPP, depending on your circumstances and the scheme’s rules.
Note: While you can transfer many UK pensions abroad, you may be subject to a 25% Overseas Transfer Charge (OTC) unless your chosen QROPS is based in the same country where you are tax resident at the time of transfer. This rule also applies if your transfer exceeds the Overseas Transfer Allowance (currently £1,073,100). Always assess the tax implications before proceeding.
What Are the Benefits of Offshore Pension Plans for Expats?
The main benefits of moving a UK pension to an offshore pension plan include:
| Currency Risk Reduction | UK pensions are denominated to sterling, which may expose expats to currency fluctuations when living abroad. Offshore pension plans often allow you to hold and withdraw funds in your local currency, helping to mitigate currency risk and improve long-term financial stability. |
| Better Investment Opportunities | Offshore pension schemes such as QROPS and international SIPPs provide access to a wider range of investment vehicles, including cash deposits, collective investment funds, government and corporate bonds, and commercial property. This flexibility supports more tailored and diversified portfolio strategies. |
| Tax Efficiency | Until 6 April 2027, many offshore pension structures remain outside the scope of UK Inheritance Tax (IHT). After this date, UK-based SIPPs and QNUPS are expected to fall within IHT on death. The treatment of QROPS is less clear as no definitive guidance has been issued. The eventual tax position is likely to depend on the structure of the scheme and the individual’s long-term residency status. Expats using offshore pensions for estate planning should review their strategies in light of these forthcoming changes and seek specialist advice. |
| Retirement Planning Flexibility | Transferring a UK pension to an offshore scheme may simplify the administration and oversight of your retirement savings. Offshore plans often offer more flexible withdrawal options, including lump sums and phased drawdown, which can enhance both retirement planning and financial control across borders. |
What Are the Drawbacks of Offshore Pension Plans?
The main disadvantage of keeping your pension in offshore pension plans is the investment risk. Fund managers may allocate your pension assets to global equities or other volatile markets. While this may generate strong returns, it also introduces the risk of capital loss if investments underperform. However, many schemes offer access to lower-risk options such as government bonds, which can help mitigate volatility and preserve long-term capital.
In addition to investment risk, offshore pension plans may expose you to certain tax charges depending on the scheme structure and jurisdiction. These include:
- A 25% overseas transfer charge (OTC) if you transfer your UK pension to a QROPS located outside your country of residence, or if your transfer exceeds the overseas transfer allowance (£1,073,100).
- A 40–55% unauthorised payment charge if you transfer to a scheme that is not recognised by HMRC. This includes an additional 15% surcharge if more than 25% of your pension is transferred outside the approved scope.
To reduce the risk of unexpected tax liabilities and ensure your retirement savings remain protected, it is essential to seek advice from a qualified financial adviser.
Key Takeaway
Transferring your pension from the UK to an offshore pension plan has traditionally been a tax-efficient strategy for building retirement wealth. These plans offer access to broader investment opportunities.
From 6 April 2027, UK Inheritance Tax will apply to most offshore pensions, including QNUPS and UK-based international SIPPs. The position of QROPS is less certain, as no definitive guidance has been issued. The eventual treatment is likely to depend on the scheme’s structure and the individual’s residency status.
This guide has explained the structure and purpose of offshore pension plans, outlined which UK pension types are eligible for overseas transfer, and assessed the suitability of different offshore schemes, including QROPS, QNUPS, SIPPs, and IPPPs. It also highlighted the benefits, risks, and upcoming tax reforms expats must consider when planning for retirement.
At Titan Wealth International, our cross-border pension specialists assist UK expats in navigating regulatory changes and making informed decisions to protect and optimise their retirement savings.
We offer a complimentary pension assessment and provide tailored guidance on pension consolidation, cross-border tax efficiency, and estate planning to help you structure your wealth effectively for the future.
