Pension Transfer: Everything a UK Expat Should Know

In this detailed guide, we’ll explain essential information about the pension transfer process—its benefits, key stages, and risks. We’ll also offer advice on how to simplify the process and prevent unexpected financial losses.

What Is a Pension Transfer for UK Expats?

A pension transfer is a process that involves moving your pension benefits or fund from one provider to another and often changing the type of your pension scheme. In the UK, transferring a pension typically refers to moving workplace pensions to private pension arrangements.

The two main types of workplace pensions in the UK are:

1. Defined benefit (final salary) pension: A workplace pension scheme where your pension income is based on your salary and length of employment at a company. The employer is responsible for managing your plan and investments.
2. Defined contribution pension: A workplace scheme where you and your employer make contributions to the pot in the form of a fixed amount or percentage of your salary. The pension provider invests the money into various assets with a fluctuating value, like shares, stocks, or ETFs.

In the case of defined benefit to defined contribution transfers, the process consists of trading your final salary pension for a specific sum of money, which is your pension’s cash equivalent transfer value (CETV). This amount of money is then transferred to a new pension plan.

You can get information about your pension’s transfer value from your current pension provider or administrator—or you can work with a professional financial adviser who can complete this part of the process for you.

At Titan Wealth International, we can assist in retrieving and analysing the transfer values of your pensions, especially if you have multiple pots. This enables us to provide clear, personal guidance on how best to streamline your pension arrangements for simpler management.

Can I Transfer My Pension to Another Person?

You can transfer your pension to another person only in exceptional circumstances such as divorce, civil partnership dissolution, or death.

In case of a divorce or civil partnership dissolution, you and your ex-partner should settle on how to split the pension. If you pass away, your pension, in part or in whole, goes to your beneficiaries. The amount your beneficiaries receive depends on your pension scheme and your age at the time of death.

In defined benefit pension schemes, the pension can only go to the person’s dependents— a spouse, children, or civil partner. The spouse usually receives 50% of the pension (some schemes allow up to 66%). Children receive 25% of the pension until they turn 18 (or 23 if they remain in full-time education).

Defined contribution schemes allow you to name any beneficiary, which can be your partner, children, or friends. In this case, beneficiaries receive the entirety or the remainder of your pension, depending on whether you started taking money from the pot.

Do I Need Advice To Transfer a Pension?

According to UK law, you can transfer your pension to another scheme without hiring a financial adviser in the following circumstances:

1. You want to transfer a final salary pension with a transfer value of less than £30,000.
2. You want to transfer a defined contribution pension whose safeguarded benefits (such as a guaranteed annuity rate) don’t exceed £30,000.

Although it’s not always mandated by law, seeking advice on transferring pensions from a regulated financial adviser is highly recommended. An adviser knows all relevant UK pension transfer rules and regulations and can help you efficiently move your pension to another scheme, ensuring full compliance and avoiding penalties.

Four Ways a Pension Transfer Could Benefit You

Potential benefits for UK expats transferring their pension to a different scheme include:

What Are the Available Pension Transfer Options for UK Expats?

UK expats have several pension transfer options available:

• Self-Invested Personal Plan (SIPP)
• Qualifying Recognised Overseas Pension Scheme (QROPS)
• Recognised Overseas Pension Scheme (ROPS)
• Qualifying Non-UK Pension Scheme (QNUPS)
• International Private Pension Plan (Section 40ee scheme)
• QROPS Self-Managed Superannuation Fund

Self-Invested Personal Plan

A SIPP is a UK-based pension scheme suitable for both UK residents and non-residents seeking total investment flexibility. Unlike standard pension schemes, a SIPP gives UK expats access to a broad range of assets to invest in, including but not limited to:

• UK and overseas company shares.
• Investment trusts.
• Funds and ETFs.
• Offshore life insurance bonds.
• Listed securities.
• Unit trusts & OEICs.

There are no limits on how you’ll contribute to your SIPP—you can pay a fixed amount each month or contribute in lump sums whenever you choose. However, the maximum amount you can contribute to a SIPP without tax charges is £60,000 annually.

A SIPP is an excellent option for UK expats who:

• Plan on returning to the UK or aren’t sure if they’ll return
• Don’t live in the UK but don’t want to move their pension overseas
• Want more investment freedom or wish to manage their assets in different currencies
• Want a bespoke investment plan that matches their risk profile instead of an employer pension that tries to cater to all members.
• Want to leave 100% of their pension to any beneficiary, even if not directly related, by moving to a different scheme. Note, however, that this is scheduled to change from 6 April 2027, as unused pension funds and death benefits will be included in a person’s estate for inheritance tax purposes, reversing the 2015 pension reforms. A consultation is underway, with draft legislation expected in 2025.
• Want investment opportunities that aren’t available on standard pension schemes, like commercial properties or trustee investment plans

SIPPs – known as an international SIPP for expats – aren’t suitable for individuals who don’t have the means to work with a financial adviser—or lack the necessary expertise to handle their investments independently.

Qualifying Recognised Overseas Pension Scheme

A QROPS is an overseas pension scheme that meets all standards set by His Majesty’s Revenue and Customs (HMRC). This scheme allows UK expats to move their pensions to another country while ensuring they’re fully compliant with relevant UK laws.

A QROPS offers numerous benefits, such as:

• Access to global investment funds without UK-imposed restrictions
• Ability to get paid in multiple major currencies, thus avoiding steep exchange rates
• Higher pension commencement lump sums (in some jurisdictions, like Gibraltar or Malta, it’s 30%)
• Ability to have your pension taxed in your country of residence

When transferring to a QROPS, be aware of two potential charges:

• Overseas transfer charge (OTS): You’ll have to pay a 25% tax charge if your QROPS is based in the European Economic Area (EEA) or Gibraltar and you live outside of these areas. The same tax applies if the QROPS is based outside of EEA or Gibraltar and you don’t live where it is based. However, you can apply for a refund if you move to the area your QROPS is in within five years of the transfer.
• Overseas transfer allowance (OTA): If you’re transferring a pension worth more than £1,073,100, you’ll have to pay a 25% tax on the excess amount.

As a QROPS is an overseas scheme, it’s not suitable for expats who don’t have long-term residency plans and may consider returning to the UK. Expats who live in high-tax regions may also find transferring to a QROPS unfavourable. As your pension income will be taxed in your country of residence, high tax rates could significantly reduce the amount of money you receive.

Recognised Overseas Pension Scheme

A ROPS is an international pension scheme that doesn’t meet the required criteria for tax benefits. A ROPS is recognised by HMRC, but since it doesn’t offer tax benefits, you would have to pay a minimum 40% tax on the transferred amount.

Qualifying Non-UK Pension Scheme

A QNUPS is an unapproved overseas pension scheme. It doesn’t offer the usual tax benefits (such as tax relief on contributions) you’d get with an approved pension scheme such as a QROPS. However, a QNUPS can still be an attractive option to UK expats because of the following benefits:

• Unlimited pension contributions.
• Tax-efficient wealth transfer to beneficiaries.
• Integration with Universal Life Insurance (ULI) or Indexed Universal Life Insurance (IUL) policies.

These policies offer life insurance coverage with a tax-efficient savings component, enabling long-term financial protection, tax-efficient growth, and flexible access to retirement income within the QNUPS structure.

These benefits make QNUPS suitable for high-net-worth expats or those seeking additional ways to save for retirement beyond the tax and investment limits of standard UK pensions.

International Private Pension Plan (Section 40ee Scheme)

International Private Pension Plans (IPPPs) are ideal pension transfer options for UK expats who require global mobility, such as those working for international companies. These schemes represent a cross-border solution allowing expats to take their pensions with them.
The Section 40ee enables individuals to move their pensions without tax penalties and enjoy benefits such as:

• Investment flexibility and more flexible withdrawal options
• No limit on contributions and no cap on benefits
• Multi-currency options

QROPS Self-Managed Superannuation Fund

If you want to move your pension to Australia, you could use a Self-Managed Superannuation Fund—but only if it qualifies as a QROPS. If you transfer to a pension fund that isn’t a QROPS, you’ll have to pay an unauthorised payment charge of up to 55% of the transferred amount. Your pension transfer could also be treated as taxable income, which would lead to double taxation.

Keep in mind that you can move your pension to a Self-Managed Superannuation Fund only if you’re older than 55 to ensure full compliance with UK legislation and QROPS rules. However, even if you’re not 55, there are solutions that can help you increase your pension benefits until you can transfer them. A professional financial adviser can guide you through the process and familiarise you with all the alternatives.

Which Pension Transfer Option Is the Best One?

The answer to this question depends on your individual needs and retirement goals. For example:

• A QROPS can be a good option for expats who are confident they won’t return to the UK and want to move their pension abroad. However, SIPPs now offer many of the same benefits as a QROPS and at a lower cost and so the suitability of a QROPS is very dependent on individual circumstances.
• A SIPP is an ideal solution for expats who want greater control to grow their pension wealth in line with their risk profile, and access it with greater flexibility.

If you’re unsure which pension scheme suits your circumstances and goals, consult a pension transfer specialist. At Titan Wealth International, we offer a comprehensive financial assessment covering property, investments, and cross-border considerations to create a personalised retirement plan for expats.

How To Transfer a Pension

The pension transfer process typically includes the following stages:

If you choose to work with an expert financial advice firm like Titan Wealth International, you’ll get:

• A dedicated financial adviser.
• Assistance with filling out the relevant paperwork.
• Comprehensive pension transfer advice on available schemes.
• A personalised recommendation on which strategy to take.
• Ongoing support managing your pension after the transfer process.

What To Consider When Transferring Pensions

There are several factors to keep in mind before deciding to transfer your pension to a new provider: