How easy is it to retire abroad?

Many individuals still dream of spending their golden years in another country, but it's crucial to organise your finances before making the transfer. The tax repercussions for your private pension are among the important factors to consider.

Where will you pay Tax on your pension if you move abroad?

Where you are deemed to be a resident often determines how much tax you pay and where you pay it. If you retire abroad but are still considered a UK resident for tax purposes, you may have to pay UK tax on your pension.

Although you might have to pay tax in the nation you live in, you typically don't have to pay UK tax on your pension if you are no longer a resident of the UK. There are certain exceptions to this; in the UK, for instance, pensions from the civil service are always subject to UK tax.

Also note, there’s a chance you'll pay taxes in two nations if you reside in one without a "double taxation agreement."

What is a QROPS?

If you're thinking about retiring abroad, you've probably heard of "Qualifying Recognised Overseas Pension Schemes," or QROPS.

A qualifying recognised overseas pension scheme is a type of overseas pension plan recognised by HMRC that can receive pensions built up in the UK.

Private or workplace pensions may be paid to you wherever in the globe you choose to retire; you are not required to join a Qualifying Recognised Overseas Pension Scheme if you wish to retire abroad.

Joining a QROPS formed in the nation where you live will allow you to receive your pension in local currency and avoid the risk associated with fluctuating exchange rates.

It's important to be aware of the Overseas Transfer Charge. This is a 25% tax charge that can apply when you move UK pension savings to a QROPS. The old pension lifetime allowance was abolished from April 2024, so transfers are no longer tested against it, but the 25% charge still applies unless your transfer meets one of a limited set of exclusions.

The rules on when the charge applies were tightened in recent years, so it is essential to check your specific situation before moving anything. In broad terms, exclusions can apply where you and the receiving QROPS are based in the same country, or where the QROPS is a genuine occupational, public service or international-organisation scheme connected to your employment. Because these conditions are narrow and have changed, take specialist advice rather than assuming an exclusion applies.

If you are weighing this up, our guides to pension transfers and transferring pensions when moving abroad are useful companion reads.

Will a Financial Adviser be required to move abroad?

A financial adviser will likely be required for everyone who wishes to open a QROPS. Also, ensure you fully understand the expenses and fees you will incur - both for the advice and for investing through the new programme.

Where can you find the QROPS online?

You can find schemes that have told HMRC they meet the conditions here. If you are self-employed and building your own pension before a move, our guide to self-employed pensions may also help.

This insight is general information and not personal financial advice. Cross-border pension rules are complex, so seek regulated advice before making any transfer.