Thinking about retiring overseas?
It’s important to understand that pension transfers are a complex area and may not be suitable for everyone. If you are considering transferring your pension overseas, we strongly recommend that you seek advice from an authorised financial adviser to ensure the transfer is suitable for your circumstances and avoid any possible unforeseen tax implications or pension fraud.
It’s exciting to think about retiring in another country, but it’s important to know how this will affect your options for how you can access your UK pension savings and to find out how your UK pension savings will be taxed in your destination country.
You should think about your own situation and future needs. It’s important that you take three steps before leaving the UK:
- Do your research - make sure you understand the rules of each pension plan you have money invested in. You can track down any previous personal or workplace pensions using the government’s free Pension Tracing Service.
- Consider taking financial advice - finding the best solution for your individual needs can be complex, particularly if you have built up different types of UK pension savings and/or have pension savings outside the UK.
- Contact all your pension providers - whether you’ve made a decision to take your pension benefits or make a transfer, get in touch sooner rather than later as an overseas transfer can take up to 6 months.
Understand the rules of your pension plan
- If you plan to live outside the UK when you retire, you may be able to access it as an income into a UK or foreign bank account.
- Transferring to an overseas scheme may be restricted if you are not a resident in the UK, so it may be a good idea to take action before leaving the UK if you’re considering this as an option.
- In the UK you can generally start to access your pension benefits from the age of 55. This is due to rise to 57 in 2028.
- You may be able to access your pension earlier if you are in ill health or have protected pension age. Any protected tax-free cash or protected retirement ages may be lost on transfer.
Transferring your pension overseas
An option for retiring overseas is to transfer your pension savings to a Qualifying Recognised Overseas Pension Scheme (QROPS) recognised by HMRC. Since 6 April 2024, an overseas transfer charge of 25% may apply when transferring pension savings to a QROPS. If no exclusion applies at the time of transfer, the 25% charge generally applies to the whole transferred value. However, even if an exclusion applies, a 25% charge can still apply to any amount that exceeds your available overseas transfer allowance. HMRC's Recognised Overseas Pensions Schemes (ROPS) list, provides a frequently updated list of countries and schemes that identify as meeting the conditions to qualify as ROPS.
Potential tax charges
A recognised transfer will not be subject to the overseas transfer charge if your transferred value does not exceed your overseas transfer allowance and you meet one of the below criteria:
- The overseas transfer charge may not apply if you are resident in the same country in which the receiving QROPS is established. Other historic EEA/Gibraltar exclusions only apply in limited transitional cases.
- The QROPS you are transferring to is an occupational pension, overseas public service or international organisation scheme and you are an employee of a sponsoring employer under one of those schemes.
The overseas transfer allowance (OTA) is the maximum value of pension savings you can transfer to a QROPS - above which you’ll be charged 25% tax on the excess. The standard allowance is £1,073,100 although some people may have a higher one.
Your available overseas transfer allowance can be reduced depending on your pension history (including how much lifetime allowance you previously used before 6 April 2024 and any earlier transfers to a QROPS).
Previously, the charge applied to only some overseas transfers. Since 6 April 2024, it applies to all of them where the allowance is exceeded unless any of the exemptions above (1 or 2) applies.
How to transfer to a QROPS
If after you’ve considered all of your options and any financial and/or tax advice relevant to your personal circumstances, you decide that you wish to transfer to a QROPS, there is a process that will need to take place.
- Contact Fidelity. We will send you forms and HMRC declarations for you and your receiving pension scheme to complete. We’ll also send you a quote for the value of your pension pot to be transferred but remember this value may be different on the date of transfer as your pension will remain invested and its value can go up or down. You’ll need to complete these forms and send them back within 60 days, and usually a transfer will take 3 to 6 months from start to finish.
- A transfer to an overseas scheme that is not a QROPS is generally treated as an unauthorised payment and can give rise to tax charges up to 55% which you will have to pay. Your pension scheme may also face a scheme sanctions charge.
- The units held in each fund for your pension will then be sold so that the value of your benefits can be paid to the receiving scheme, that means there will be a number of working days where your savings won’t be invested in the market. Fidelity will let you know when your transfer has been completed.
Beware of pension fraud
Your pension could be the single, your pension could be the single biggest asset you have. Unfortunately, this makes it a target for scams. There are lots out there, and some can seem very convincing, but the usual rules of thumb apply. If something seems too good to be true, it probably is and you should never act on anything without checking it thoroughly first (particularly when someone contacts you without you asking them to). Learn about the common threats to your financial security, discover what we’re doing to keep you safe and find out where to get help if you need it. ScamSmart - Avoid investment and pension scams | FCA & Steps to stay scam safe