Moving Abroad with a UK Pension | The Complete Expat Playbook
Many British citizens dream of living or retiring abroad. Moving overseas opens up a world of exciting opportunities, with new cultures, cuisines and communities to immerse yourself into. However, along with the promising possibilities of expat life, questions and uncertainties inevitably arise regarding how to manage your finances abroad, particularly what to do with your UK pension.
When you leave the UK, you will not have to leave your lifetime of pension savings behind, but you may have to re-think how those savings will work for you in a new environment, with new rules and regulations.
Understanding your pension options is essential to securing your financial future abroad. Our comprehensive guide highlights the most critical considerations: from what UK pensions may look like after leaving Britain, to the key differences between leaving your pension where it is and transferring it to an international scheme designed for expats. We explain international pension structures, tax impacts, common pitfalls and provide practical examples so you can make the move with confidence.
Your UK Pension Overseas
Most UK pension schemes have been designed to suit the needs of UK tax residents. This means that once you move abroad and become a non-UK resident, complications often emerge, since various restrictions on how you access and manage your pension may be applied.
If you choose to leave your pension with your current UK provider, it is essential to get clarity on how some of these restrictions may apply to you. Many providers refuse to pay into overseas bank accounts altogether, forcing clients to maintain a UK bank account, and expose their hard-earned retirement funds to currency exchange risk with every international transfer.
Others may impose limits on international drawdowns and only allow once-off lump sum payments. This can trigger disastrous tax consequences as well as inhibiting potential long-term growth by removing pension funds from investment markets.
This shift in how pensions can be accessed post-departure is a direct result of regulatory changes, and it means that leaving your pension untouched with a UK provider is not always the simplest or most tax-efficient option. However, there are situations- such as holding a valuable Defined Benefit (final salary) pension with a guaranteed lifetime income- where staying put may still make sense, particularly if moving that scheme would reduce its value.
Your tax residency status after you leave the UK also matters. While tax rules on pensions don’t automatically change the moment you become a tax resident elsewhere, how much tax you pay on withdrawals, how your pension income is treated and whether you have local tax credits all depend on double taxation agreements between the UK and your new home country.
Careful planning around where you live for tax purposes, timing when you withdraw your pension,and understanding how tax treaties apply can significantly impact your long-term retirement income.
Overseas Pension Schemes - QROPS VS The International SIPP
Due to the difficulties and frustrations which come with leaving your pension in the UK, most expats opt for a pension transfer. Typically there are two main options: a QROPS (Qualifying Recognised Overseas Pension Scheme) and the International SIPP (Self-Invested Personal Pension).
Historically, QROPS were widely recommended for British citizens seeking to move pension funds overseas without tax penalties. These schemes, recognised by HMRC, allowed UK expats to transfer pension assets into a qualifying overseas plan without triggering an unauthorised payment charge. HMRC keeps a list of these schemes, which can be found here.
However, recent regulatory changes have greatly diminished their appeal for most expats. Today, transfers to QROPS from the UK are typically subject to a staggering 25% Overseas Transfer Charge unless both the individual and the pension scheme are resident in the same jurisdiction, which is rarely the case for most expats.
Consequently, QROPS are now often a poor choice for those living abroad, with the charge alone potentially eroding significant portions of your pension.
In contrast, the International SIPP is a pension solution developed specifically for expats. These schemes technically remain UK-based, retaining the regulation of the Financial Conduct Authority and protected by the Financial Services Compensation Scheme, and are therefore transfers are not subject to the Overseas Transfer Charge.
The International SIPP is optimised for non-UK residents and is typically more transparent, cost-effective and flexible than many traditional UK workplace pensions. They also offer broader investment choice, multi-currency options and full flexible access drawdown, allowing you to manage how and when you take income in retirement.
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There are situations where an International SIPP may not be the right solution- including if you need very specific asset types that are limited within SIPPs, or if your UK pension already offers competitive features that suit your long-term plans- but for most expats, the flexibility and multi-jurisdiction suitability of the International SIPP means it often outperforms other options.
The Wealth Genesis | International SIPP
Your Pension Income Abroad: Why Tax Residency Matters
When you move abroad, your tax residency plays a major role in determining where your pension income will be taxed. For this reason, it is important to get familiar with both UK tax rules and the tax system in your new home country, which may feel complex at first. To help expats avoid paying tax twice on the same income, the UK has double taxation agreements with many countries, including popular expat destinations such as France, Spain, Portugal and the USA and Canada. However, these agreements don’t all work in the same way, particularly when it comes to pensions.
In some cases, your pension may only be taxed in the country where you live. In others, the UK may still tax certain types of pension income before it reaches you. Some jurisdictions may offer tax credits or exemptions on foreign pensions, but these benefits depend entirely on the specific agreement in place. For example, the UK-Portugal tax treaty can allow pension withdrawals to be taken more efficiently if they’re planned carefully, whereas in other countries the tax outcome may be less favourable without the right structure in place.
Because the rules vary so much between countries, understanding exactly how your pension income will be taxed and what your reporting requirements will be abroad is essential if you want to preserve more of your retirement income. This is why many expats choose to seek professional advice from cross-border specialists who understand both UK pensions and the local tax system where they live. With the right guidance, it’s far easier to avoid unexpected tax bills and ensure your pension withdrawals are timed and structured as tax-efficiently as possible.
Common Mistakes Expats Make Abroad
Many UK expats overlook their pension arrangements when moving abroad, which can lead to unexpected restrictions once they leave the UK. Since Brexit, and amid changing pension provider policies for non-UK residents, many expats find that their ability to access flexible draw-down, manage investments, or even receive payments into foreign bank accounts changes once they move abroad. Without addressing these issues before departure, you may be left with limited options and forced into sub-optimal solutions, potentially leading to unfavourable tax consequences.
Another common mistake is underestimating currency risk. If you hold a UK pension and withdraw in pounds while spending in another currency, exchange rate fluctuations can gradually erode your retirement income over the long term. International pension plans that allow multi-currency holdings can help reduce this risk by giving you the flexibility to hold and withdraw funds in a currency that suits your needs.
Lack of consolidation can also be costly and inefficient. Many expats build up several pension pots over their careers, spread across different employers and schemes. When these pensions are left scattered and unmanaged, it becomes harder to keep track of them or plan effectively for retirement. This can lead to unnecessary fees, missed investment opportunities, and a strategy that no longer fits your long-term goals. Bringing your pensions together into a single, well-structured plan makes them easier to manage and can open the door to more suitable investment options.
Finally, many expats overlook the estate planning advantages offered by alternative pension structures. Overseas pension solutions, such as International SIPPs, provide greater flexibility when it comes to nominating beneficiaries, making it easier for your pension to pass to loved ones. This is in contrast to some UK pension schemes which place more restrictions on how and when benefits are passed on.
Expat Pension Planning | Practical Example
Imagine a British couple who sell their UK home and retire to Portugal. Over the years, they’ve built up several defined contribution workplace pensions, along with a small final salary scheme. Before leaving the UK, they contact their pension providers to understand what will change once they become non-UK residents. They quickly discover that some schemes will restrict how and when they can access their pensions, and a few will not pay benefits directly into a Portuguese bank account. They also realise that continuing to take income in pounds, while spending in euros, could expose them to ongoing currency risk.
With this in mind, they explore their options. Leaving their pensions in the UK would mean managing several separate pots, facing limited investment choices and higher charges, and regularly converting sterling income into euros. By contrast, consolidating their defined contribution pensions into an International SIPP would give them everything in one place, a wider range of investment options, and the flexibility to hold and withdraw money in euros to match their day to day expenses. It would also allow their withdrawals to be structured in line with the UK-Portugal tax treaty, potentially improving their tax position.
After seeking professional advice to confirm how their pension income would be taxed in Portugal, they decide to transfer their defined contribution pensions into an International SIPP, while keeping their final salary scheme for its guaranteed income. The result is a simpler, more efficient setup that reduces ongoing costs and gives them greater control over how their retirement income supports their new life abroad.
Next Steps for UK Expats Moving Abroad
If you’re planning to move abroad, start by getting a clear picture of your UK pensions. Gather details of every scheme you hold and contact each provider while you are still a UK resident. Ask how your options may change once you become a non-UK resident, particularly around flexible draw-down, investment control, and whether payments can be made to an overseas bank account. It’s also important to check whether any additional restrictions or charges apply to non-UK residents, as these can materially affect your choices later on.
The next step is to understand your tax position. Review when you will become a tax resident in your new country and how your pension income will be taxed both there and in the UK. Double taxation treaties can offer valuable protections, but the rules vary widely by country and by pension type. Taking advice at this stage can help you avoid unnecessary tax and ensure withdrawals are timed in the most efficient way.
Once you have clarity on access and tax treatment, you can begin comparing your longer-term options. This includes deciding whether it makes sense to leave your pensions as they are or to consolidate them into an international solution, such as an International SIPP. Consider how many pension pots you are managing, the fees you are paying, the investment flexibility you require, and whether holding and withdrawing funds in different currencies would better support your life abroad. Weighing up the costs, tax implications and practical benefits will help you make a more informed decision.
At this stage, working with a cross-border financial adviser specialised in expat finances can make a real difference. At The Wealth Genesis, our advisers have extensive experience with pension transfers and are fully regulated to help expats internationally. We work with you to create a bespoke strategy that protects your wealth, supports your lifestyle abroad, and helps you achieve your long term financial goals.
Moving abroad with a UK pension doesn’t have to be complicated. With proper planning, expert guidance, and a clear understanding of your options, you can build a retirement strategy that supports your goals and gives you confidence in your financial future. To learn how we can help, book a call with us today using the diary below.
