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’ll explain what offshore pension plans for expats are and which schemes are suitable for UK expats. We’ll also provide information on UK pensions you can transfer overseas and outline the benefits and drawbacks of offshore pension plans.
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 called overseas pension schemes, are personal retirement savings plans based outside the UK. These schemes have multiple common characteristics—they typically:
- Offer various tax benefits
- Provide access to a wide range of investment options
- Accept worldwide contributions
- Allow withdrawals in local currency
Many expats transfer their UK pension to an offshore plan in a foreign jurisdiction where they live. This simplifies the management of and access to their retirement savings.
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:
- International self-invested personal pension (SIPP)
- Qualifying recognised overseas pension scheme (QROPS)
- Qualifying non-UK pension scheme (QNUPS)
- International private pension plan
International Self-Invested Personal Pensions (SIPP)
International SIPPs are pension plans designed for expats and non-UK residents who live abroad but want to keep managing their UK retirement savings. While QROPS are more suitable for expats planning to retire abroad, international SIPPs are a better option for expats with UK ties who may return to the UK.
These offshore schemes allow you to transfer your UK pension and invest the funds in worldwide assets like stocks and bonds. This way, you can grow your pension pot while maintaining the regulatory protection of the UK’s Financial Conduct Authority (FCA).
International SIPPs offer benefits similar to those of QROPS. This includes:
- Tax reliefs and exemptions from IHT (only applicable until 6 April 2025—after this date, offshore pensions will no longer be outside of UK Inheritance Tax rules)
- A flexi-access drawdown option
- Various investment opportunities
- Multi Currency investments
However, QROPS rules often vary depending on the jurisdiction. For example, while QROPS aren’t liable for IHT in the UK, they may be subject to IHT in their country of origin. This isn’t the case for international SIPPs, as only UK laws apply to them.
International SIPP’s benefits that offer an advantage over QROPS include:
- Tax-free growth of funds within the pension
- Lower pension transfer fees
- Typically a wider range of possible investments
If you’re interested in moving your UK pension to an international SIPP, financial advisers at Titan Wealth International offer an assessment of your pension and can create a personalised SIPP plan that meets your retirement goals.
Note: From 6 April 2025, offshore pensions will no longer be exempt from IHT under the new UK tax rules. Expats planning to use this as an estate planning tool will no longer be able to do so after this date.
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 make the list, a foreign pension scheme must be considered a recognised overseas pension scheme (ROPS), meaning it has to:
- Be registered as a pension scheme for tax purposes in a country where it’s based
- Be regulated by a pension scheme regulator in its country of origin
- Comply with HMRC withdrawal age requirement (currently 55, but changing to 57 in 2028)
- Allow early withdrawals only in case of ill health or if you work a job with an early retirement age, like military personnel or professional athletes
To qualify for a UK pension transfer to a QROPS, you must be a UK non-resident or a resident planning to move abroad within a year. You must also be between the ages of 18 and 75.
If you decide to transfer your UK pension to a QROPS, one of the benefits (available until April 2025) you’ll have is taking between 25% and 30% of your pension tax-free, depending on the jurisdiction. Your pension fund is also exempt from UK inheritance tax (IHT), and you get access to a wide range of investment options.
However, from 6 April 2025, UK IHT rules will apply to QROPS. This means pension funds held in a QROPS will no longer be exempt from UK IHT, significantly reducing the tax benefits for expats using these schemes.
Still, before the transfer, you should consider potential fees. This includes the overseas transfer charge of 25% if you move a UK pension to a QROPS that isn’t located in your country of residence. This fee also applies if you exceed the overseas transfer allowance of £1,073,100, in which case you need to pay a 25% charge on the amount above the allowance.
QROPS also has strict HMRC reporting requirements, so speaking to a financial adviser can properly prepare you for the transfer.
Note: From April 2025, QROPS will no longer provide an IHT exemption, so if estate planning is your primary goal, alternative solutions may be required.
Qualifying Non-UK Pension Scheme (QNUPS)
QNUPS are tax-efficient pension schemes located outside of the UK that allow you to make investments overseas. They were introduced by HMRC in 2010 and are popular among expats who have maxed out the yearly UK pension allowance limit but are still interested in investing.
You can set up a QNUPS in one of the three major financial centres:
- Guernsey
- Malta
- The Isle of Man
Once you do, you can enjoy various benefits like:
- An exemption from IHT and capital gains tax (CGT) (only available until April 2025—after this, QNUPS will be subject to UK IHT)
- Access to your funds when you turn 50 (in Malta) or 55 (in Guernsey)
- A 25–30% tax-free lump sum
- Unlimited contributions to your pension pot
- No HMRC reporting requirements
- Incorporation of life insurance policies like universal life insurance (ULI) or indexed universal life insurance (IUL) for tax-efficient growth and enhanced wealth preservation
You can only transfer your UK pension to a QNUPS if it holds a QROPS status. If this isn’t the case, you’ll be liable for a 55% tax charge for unauthorised payments. This is why QNUPS are more suitable as pension plans for holding additional savings and international assets.
Note: From April 2025, QNUPS will no longer be exempt from IHT. This means expats will not be able to use QNUPS as a way to shield their pension from UK inheritance tax. Those considering QNUPS for estate planning must act before this deadline or explore alternative options.
International Private Pension Plan
International private pension plans (IPPPs) are created for employees of multinational companies who can’t benefit from standard pension plans because they require worldwide mobility. Nowadays, IPPPs are also used by expats who need flexible pension plans and cross-border solutions.
If you opt for an IPPP, you can enjoy advantages like:
- Lump-sum payments
- No restrictions on investments
- No limit on the benefits you can receive
While transferring a pension to an IPPP results in tax liabilities, expats frequently resort to this solution in the absence of better local alternatives.
Which UK Pensions Can I Move Abroad?
The UK pensions you can move abroad include the following:
| 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 decide to return to the UK, you can transfer your pension from QROPS to an international or UK-based SIPP.
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 limited to sterling, meaning you could lose money due to currency fluctuations if you lived abroad. Offshore pension plans allow you to invest and withdraw funds in local currencies, protecting you from such risks. |
| Better Investment Opportunities | Offshore pension schemes like QROPS and international SIPPs provide access to investments like cash deposits, investment funds, government and corporate bonds, and commercial property, allowing you to diversify your portfolio. |
| Tax Efficiency | The funds held in offshore pension plans for expats were previously exempt from IHT, providing a tax-efficient way to pass on wealth. However, from 6 April 2025, offshore pensions—including QROPS, QNUPS, and International SIPPs—will now be subject to UK inheritance tax. Expats who intended to use these pensions to pass on assets tax-free will no longer be able to do so. |
| Retirement Planning Flexibility | Moving a UK pension to an offshore pension plan simplifies managing your pension pot and investments. You also have more flexibility when withdrawing funds—you can take them as a lump sum or invest them further—which helps you plan your retirement more easily or manage your finances more efficiently. |
What Are the Drawbacks of Offshore Pension Plans?
The main disadvantage of keeping your pension in offshore pension plans is the investment risk. Some fund managers may invest your money in the global stock market, which is inherently volatile. This means that you can either earn high returns or lose money if the investments perform poorly. Still, if you have a choice to invest in lower-risk assets like government bonds, stock market volatility shouldn’t impact your wealth growth.
Besides this, you may be liable for certain tax charges depending on the offshore pension scheme you choose. For example, you may be subject to:
- A 25% overseas transfer charge when moving funds to a QROPS in a country you don’t live in, or your transfer amount exceeds the overseas transfer allowance
- A 40–55% unauthorised payment charge if you make a transfer to a scheme HMRC didn’t approve—the minimum is 40%, but there’s an additional 15% if you transfer over 25% of your fund
To reduce tax liability and preserve your retirement savings, consider speaking to a financial adviser.
Key Takeaway
Moving your pension from the UK to an offshore pension plan for expats has traditionally been a tax-efficient way to grow your pension pot, providing access to diverse investment opportunities and, in some cases, inheritance tax exemptions.
However, from 6 April 2025, UK IHT rules will apply to offshore pensions, including QROPS, QNUPS, and International SIPPs. This means expats will no longer be able to use these schemes to shield their pension from UK inheritance tax, making estate planning through offshore pensions significantly less beneficial.
In this guide, we’ve explained what offshore pension plans are, which UK pensions can be transferred, and which overseas schemes accept pension contributions from UK expats, including QROPS, QNUPS, SIPPs, and IPPPs. We’ve also highlighted the upcoming tax rule changes, as well as the benefits and risks of moving a UK pension abroad.
At Titan Wealth International, our pension transfer experts help UK expats navigate these regulatory changes and make informed decisions about their retirement savings.
We provide a complimentary pension assessment and offer tailored advice on pension consolidation, cross-border tax efficiency, and alternative estate planning solutions to help you optimise your pension for the future.
