Can I transfer an overseas pension to the UK?

If you’ve decided to retire in the UK, having your pension on these shores can make life a lot simpler. You won’t have to worry about currency changes affecting its value for a start. But there are a few steps you’ll need to think about. You could even face a hefty tax bill to move it. We’ll cover the main issues with moving from an overseas pension scheme here.

This is any pension scheme that operates outside the UK. Rather than being regulated by UK legislation, these schemes follow the laws of the country where they’re located. This means they may have different rules on contributions, payouts, and tax relief.

If you’ve worked and built up a pension in one country, there may be drawbacks if you retire in the UK and keep your pension overseas. Changes in the exchange rate between GBP and the local currency where your pension is based can make any monthly payments unpredictable – so it’s hard to budget for your lifestyle. If the local currency isn’t stable you could even see a big drop in the value of your pension pot during your retirement. 

What happens to your private pension when you move to the UK, depends on which type it is. 

Overseas pensions can be defined contribution, where the value depends on the size of contributions and investment performance – the value of this, minus any charges can be transferred. 

It may also be a defined benefit pension, which provides a guaranteed payment, based on salary and years of service. If you transfer a defined benefit pension to the UK, rather than getting those payments you’ll get an offer for the cash equivalent transfer value (CETV), so that can be invested in your new pension. 

Remember, if you have a defined contribution pension scheme, the value can go down as well as up, and you may get back less than has been invested. However, this does not apply to defined benefit schemes, where the payout is typically guaranteed.

While transferring your pension from abroad can be complicated, making sure you follow every step can prevent any unwanted financial surprises. 

Firstly, get together any documents giving the details of your pension, like statements and the terms and conditions. Then contact your overseas pension provider. A key question is to check the eligibility of your pension scheme to be transferred to the UK and that your UK pension scheme can accept the transfer in.

It needs to be a Qualifying Recognised Overseas Pension Scheme (QROPS) for Aviva to accept the transfer. This means the scheme has made a declaration to HMRC that it meets the regulatory standards laid out by HMRC – the UK tax office. Once the money has been transferred into the UK, it is treated the same as any other UK pension scheme. However, there could be tax implications if the UK pension is later transferred overseas to a non-QROPS scheme. This does not affect the initial transfer into the UK. Note that some providers may accept transfers from non-QROPS schemes, so it’s important to check with your specific pension provider.

For further information on Qualifying Recognised Overseas Pension Scheme (QROPS) status and to check if your pension scheme is recognised, please visit the official HMRC guidance here.

Choose a new pension provider in the UK that meets your needs, including checking whether they accept transfers from a Qualifying Recognised Overseas Pension Scheme (QROPS). Let them know your situation so they can advise you on any potential charges associated with the transfer. When you’ve decided on the transfer, fill out any forms, and your providers will get the transfer underway. Check in with them during the transfer in case there are any issues, and make sure the funds arrive in your UK pension account.

Transferring an overseas pension isn’t as simple as moving from one provider to another in the UK. There are a few possible pitfalls you need to watch out for.  

You’ll also need to check the tax laws between the UK and the country where your pension is currently held. If you’re living outside of the UK when you take your pension, there’s a risk that you could be taxed in both countries.

The timing of your transfer could be important as changes to the exchange rate could affect the value of your pension pot, especially if it’s a large amount. You may also find that currency conversion fees can eat into the amount you’ve transferred. To try and reduce these risks, you should keep an eye on the exchange rate if your transfer isn’t urgent, so you can aim to move it when you’ll get a better deal.

The investment options available in your new UK pension scheme may be different to those in your old overseas scheme, which could mean changes in the performance. At Aviva we offer a self-invested personal pension (SIPP) with a wide range of investment options. However, please remember that the value of pensions can go down as well as up, and you may get back less than has been paid in.

You should also speak to a financial adviser with experience of overseas pensions to make sure you’re not hit with any unexpected costs – you can find one at unbiased.co.uk, there will be a charge for advice.

You’ll face a range of charges when you transfer your overseas pension, so it’s best to do your research before kicking things off. 

Both the overseas scheme you’re transferring from and the pension scheme in the UK may charge fees for the transfer process. These can include admin fees, exit fees from the overseas scheme, and set up fees to the UK scheme. Providers may also offer a worse currency conversion rate for your money, to take a cut from the transfer as profit. 

You’ll also have to pay for any professional pension advice to check whether you’ll face any tax issues and are meeting the regulatory requirements in the UK.