How to transfer an overseas pension to the UK

It is often possible to transfer an overseas pension to the UK, but the rules vary by the origin country and type of pension being transferred. In some cases, it may be better to draw down money from the overseas pension into a local bank account, and transfer or withdraw that money in the UK.

Transferring an overseas pension to the UK might depend on:

  • whether it’s an eligible QROPS pension scheme
  • whether a UK pension provider is willing to accept the transfer
  • the specific transfer rules of the origin country

PensionBee and pension transfers from abroad

As of May 2021, PensionBee doesn’t accept overseas pension transfers.

Moving money from an overseas pension into a PensionBee pension can be done indirectly, however there are likely to be tax efficiency implications which should be discussed with a suitable financial adviser.

An overseas pension can be drawn down into a local bank account, before that money’s transferred to a UK bank account and then paid into a PensionBee pension plan. PensionBee is unable to accept international bank payments.

If moving money using this method, bear in mind:

  • To transfer money to a UK bank account, a currency exchange fee may apply
  • Money transferred to the UK may gain or lose value as exchange rates fluctuate
  • Tax considerations around withdrawing the pension
  • Contribution limits

For further information, please see our FAQ.

Qualifying Recognised Overseas Pension Schemes (QROPS)

QROPS are a type of overseas pension that meet a set of rules set by HMRC - for example, not being accessible until the age of 55. Overseas pensions that meet these rules are easier to transfer to the UK than ones that don’t.

Here is a list of overseas QROPS.

If your overseas pension is QROPS:

  • some UK pension providers may be happy to accept the transfer, though they may also conduct additional fraud checks first
  • it should take the same amount of time to transfer compared to a UK-based pension

If your overseas pension isn’t QROPS:

  • your UK pension provider may refuse to take the transfer

Overseas transfer charges

Some overseas transfers from QROPS may incur a 25% tax charge. This is deducted by the QROPS provider on behalf of HMRC, before the transfer is made.

Transfers from non-QROPS may incur an unauthorised payments charge of at least 40%.

The particular details around overseas transfer charges can be a little complicated. For further details, see the gov.uk website.

What are the tax implications of transferring a pension from overseas?

Impact on tax relief

Most UK taxpayers will benefit from tax relief when making contributions into their UK pension. A standard rate taxpayer would receive a £20 top up on a £100 contribution, for example.

But overseas pension transfers into UK pension plans aren’t considered contributions. Therefore, they’re ineligible for tax relief. So a basic rate taxpayer wouldn’t receive any top up if they were to transfer their overseas pension to the UK.

Impact on the annual allowance

The annual allowance is the maximum amount of money that can be paid into a UK pension before a tax penalty is charged. The allowance as of the 2020/21 tax year is 100% of your salary or £40,000 (whichever is lower).

Because overseas transfers aren’t considered contributions, they won’t contribute to the annual allowance. Therefore, an overseas pension worth more than £40,000 could be transferred to a UK pension without incurring a tax penalty.

Impact on the lifetime allowance

The lifetime allowance is the maximum amount of money you can draw down from your pension during your lifetime, without paying a tax penalty. The allowance, as of the 2020/21 tax year, is £1,073,100.

Because transfers from overseas aren’t considered ‘benefit crystallisation events’ (BCEs), they won’t trigger a test against the lifetime allowance. But when a BCE does occur (when money is first taken out of a pension, for example), the overseas money previously transferred into that pension will count towards the lifetime allowance.

If the overseas transfer is made from a QROPS pension, the lifetime allowance can be increased by the transferred amount and no tax penalties will be charged. For example, transferring £100,000 from a QROPS would increase the lifetime allowance to £1,173,100. To do this, a claim must be made to HMRC within five years of the transfer being made.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

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