Foreign Pensions and QROPS: How UK Tax Applies in 2026/27

A QROPS is a Qualifying Recognised Overseas Pension Scheme: an overseas pension scheme that meets HMRC conditions and appears on HMRC's published list, so a UK registered pension can be transferred to it without an unauthorised payment charge. It is the standard route for moving UK pension savings abroad when someone is leaving or has left the UK.

Being on the QROPS list does not make a transfer tax-free. The transfer is tested against the Overseas Transfer Charge, and the scheme and member then sit inside a reporting window for several years. Whether a charge arises depends heavily on where the individual is resident and where the scheme is established, which is why this is an area to take advice on rather than assume.

The Overseas Transfer Charge (OTC) is 25% of the transferred value of a UK registered pension moved to a QROPS, unless one of the listed exclusions applies. It is a single up-front charge deducted by the scheme administrator from the amount transferred, not an annual tax.

So a £200,000 transfer that does not qualify for an exclusion suffers a £50,000 charge (25% of £200,000), leaving £150,000 to arrive in the QROPS. Where an exclusion applies the charge is nil, but the transfer still enters the reporting window described below.

From 30 October 2024 most transfers to a QROPS established in the EEA or Gibraltar lost their exclusion and now face the 25% charge. The change was announced at the Autumn Budget that day: for transfers requested on or after 30 October 2024, the old EEA and Gibraltar exclusion no longer applies, so the OTC bites unless one of the narrower exclusions is met.

A transitional rule preserves the old position only where the transfer was requested before 30 October 2024 and completed before 30 April 2025. The stated reason for the change was to address the risk of individuals obtaining double tax-free allowances. If you started a transfer to an EEA or Gibraltar scheme around these dates, the timing is decisive and worth checking carefully.

After 30 October 2024 the OTC is removed only in a short list of cases. No charge arises where one of these is met:

• The member is tax-resident in the same country as the country in which the receiving QROPS is established.
• The QROPS is an occupational pension scheme and the member is an employee of a sponsoring employer under the scheme when the transfer is made.
• The scheme was set up by an international organisation for its employees and the member was such an employee.
• The scheme is an overseas public service pension scheme and the member is an employee of a participating employer.
• The transfer was requested before 9 March 2017.

These tests turn on the precise residence of the member and the legal nature of the scheme, so two outwardly similar transfers can produce very different results. We would always confirm the exclusion in writing before a transfer proceeds.

An exclusion is not settled forever: the OTC has a relevant period of five full UK tax years following the transfer, during which the position is re-tested if circumstances change. A charge can become due, or a charge already paid can be refunded.

The window runs from the transfer date to the next 5 April, then a further five years from the following 6 April (if the transfer falls on 6 April, it is simply five years from that date). Inside the window the 25% charge can become due if circumstances change so an exclusion no longer applies, and a charge already paid can be refunded if circumstances change the other way. Once the window expires, neither applies.

The practical trap with the same-country exclusion is movement. If you transferred to a scheme in the country you lived in, then moved away within those five tax years, the exclusion can fall away and the 25% charge can crystallise even though nothing about the scheme changed. Note this OTC window is distinct from the separate ongoing reporting obligations that scheme managers have under the wider overseas-pension rules.

A move within the window can turn a nil charge into a £75,000 bill. Illustrative only: suppose a member transfers a £300,000 UK pension to a QROPS established in the country where they are resident. At the time of transfer the same-country exclusion applies, so the charge is nil and £300,000 arrives in the QROPS.

Two tax years later, still inside the five-tax-year relevant period, the member relocates to a different country, so they are no longer resident where the QROPS is established and no other exclusion applies. The transfer is re-tested and the 25% OTC becomes due: 25% of £300,000 is £75,000. Had the same move happened after the window closed, no OTC would arise. The arithmetic is simple; the difficulty is tracking residence and timing across years, which is exactly where advice pays for itself.

A UK resident is taxed on 100% of foreign pension income they receive. Since 6 April 2017 the old 10% deduction (the 90% rule) has been abolished by Finance Act 2017, so the full amount is taxable, broadly as if it were UK pension income.

The income is reported on the foreign pages SA106 alongside the SA100 Self Assessment return, converted to sterling. It is then taxed at the normal rates after the GBP 12,570 Personal Allowance, so 20%, 40% and 45% as income rises through the bands. Where foreign tax has also been deducted at source, double tax relief (below) is the mechanism that prevents the same income being taxed twice.

Lump sums paid from a foreign pension scheme are taxable for a UK resident from 6 April 2017, but not always in full. There is a deduction for the value of lump-sum rights that had accrued before 6 April 2017, so it is broadly the growth from 6 April 2017 onwards that is taxed.

Some lump sums remain exempt, including those under UK registered pension schemes, relevant non-UK schemes (RNUKS) and UK-established employer-financed retirement benefit schemes. Establishing how much of a lump sum is protected pre-2017 value and how much is taxable growth needs the scheme history, so this is fact-specific and should not be estimated from the headline figure alone.

Australia works differently from a standard QROPS transfer: Australian superannuation funds generally cannot accept a UK pension transfer as a QROPS because of age-related preservation rules, so moving a UK pension into Australian super is usually not a clean option. It is one of the busiest pension corridors we see, and the most misunderstood.

In practice the planning for UK-to-Australia clients turns less on transferring the pot and more on residence and the UK to Australia tax treaty: which country has the right to tax a pension once you are resident in Australia, how split-year treatment applies in the year of departure, and how any UK lump sum is treated on both sides. Because the answer depends on your residence and the specific scheme, we treat this as advice-led rather than a product decision.

Foreign pensions almost always raise a double taxation question: the country paying the pension may tax it, and the UK taxes it too if you are UK resident. The relevant double tax treaty usually decides which country has the primary right to tax a given pension, and double tax relief in the UK then credits foreign tax against the UK liability so the same income is not taxed twice.

Where a treaty gives taxing rights to your country of residence, you may be able to have the foreign tax stopped at source rather than reclaimed, often by submitting a DT-Individual claim. Getting the treaty analysis right before the first payment is far cheaper than unwinding double taxation afterwards.

Talk to us before anything is irreversible: whether you are considering a QROPS transfer, have already transferred and are inside the five-year window, or you receive a foreign pension as a UK resident, we can confirm the charge position, the exclusions and the treaty treatment in writing. Because so much turns on your residence and the scheme's country, this is genuinely individual, and we quote a fixed fee agreed upfront once we understand the facts.

Use the tools below to map the country position and estimate fees, then book a review and bring your transfer paperwork, scheme statements and any foreign tax certificates, so we can give you a concrete answer rather than a general one.