Leave Your UK Pension in the UK vs Transfer to a QROPS: The 2026/27 Decision

Keeping your pension in a UK scheme, usually a low-cost SIPP, and planning how you draw it as a non-resident is the better route for the clear majority of emigrants. It avoids the 25% Overseas Transfer Charge entirely, keeps you inside the UK regulatory and compensation framework, and, where the relevant double tax treaty gives your new country the taxing rights, an NT code can have the pension paid to you without UK tax deducted. You give up almost nothing by staying put.

A QROPS transfer, by contrast, is an irreversible product decision with an upfront tax test. Since 30 October 2024 there is no exclusion for schemes in the EEA or Gibraltar, so the classic expat route (living in one country, scheme in Malta or Gibraltar) is charged at 25%. There is no HMRC-recognised scheme at all in the UAE, Saudi Arabia, Qatar, Bahrain, Kuwait or Oman, so Gulf residents have nowhere local to transfer to. And even a charge-free transfer sits inside a re-testing window for five full tax years, during which moving country again can crystallise the 25% retrospectively.

The honest exception is inheritance tax. From 6 April 2027, unused funds in a scheme established in the UK are inside the UK inheritance tax net wherever you live, while a scheme established outside the UK falls out of scope once you are no longer a long-term UK resident. For a minority of settled emigrants with large pots, that changes the calculation, and we cover it below.

The pattern is clear: the UK route wins on cost, protection and flexibility, and the QROPS route only pulls ahead where the same-country exclusion applies and the April 2027 inheritance tax exposure genuinely matters to you.

The Overseas Transfer Charge is 25% of the amount transferred from a UK registered pension to a Qualifying Recognised Overseas Pension Scheme, deducted by the scheme administrator unless an exclusion applies (GOV.UK). On a £400,000 transfer with no exclusion, £100,000 goes to HMRC and £300,000 arrives in the QROPS. It is a one-off charge, not an annual tax, but it is rarely worth paying voluntarily.

Since the Autumn Budget of 30 October 2024, the surviving exclusions are narrow: you are tax-resident in the same country as the receiving QROPS; the QROPS is an occupational scheme of your sponsoring employer; the scheme was set up by an international organisation for its employees; or it is an overseas public service scheme in which you are employed. The old exclusion for EEA and Gibraltar schemes survives only for transfers requested before 30 October 2024 and completed before 30 April 2025 (HMRC Pensions Tax Manual PTM102200).

An exclusion is also not settled forever. The position can be re-tested if your circumstances change within five full tax years of the transfer: qualify under the same-country exclusion, then move somewhere else inside the window, and the 25% charge can become due even though the scheme has not changed. A charge already paid can equally be refunded if circumstances move the other way.

A transfer earns serious consideration when three things line up. First, you are settled long term in a country that actually has credible, well-regulated QROPS (Australia via a compliant SMSF route, Ireland and New Zealand are common examples; the Gulf states have none), so the same-country exclusion removes the 25% charge. Second, your pot fits within your available Overseas Transfer Allowance, or you accept the charge on the excess. Third, the transfer solves a problem that drawdown planning cannot: usually the April 2027 inheritance tax exposure, sometimes currency matching or consolidating retirement savings where you will genuinely retire.

Even then, go in with open eyes. You are swapping UK regulation and compensation for a local regime, fees are typically higher, and if you move country again within the five-tax-year window the charge can bite retrospectively. Returning to the UK later also needs thought, because it changes both the tax analysis and the point of the exercise. And a transfer is a regulated pensions decision as well as a tax one, so it needs a regulated pension transfer adviser alongside tax advice, particularly for defined benefit rights.

Be blunt about the sales dynamics too. Much of the QROPS marketing aimed at expats is commission-driven, and the burden of proof should sit with anyone proposing that you move your pension out of the UK. If the case cannot survive a sober comparison against simply keeping the pension and drawing it under an NT code, it is not a case worth acting on.

If you leave the pension in the UK, the planning moves to how you draw it. By default a UK provider deducts income tax under PAYE even though you live abroad (GOV.UK). But most UK double tax treaties give your country of residence the taxing rights over private pension income, and where that applies you can ask HMRC for an NT (no tax) code so the pension is paid gross. In a country that does not tax the income either, such as the UAE under Article 17 of the UK-UAE treaty, the result can be pension income taxed nowhere.

The claim runs through Form DT-Individual, certified with a tax residency certificate from your new country, once you are non-resident under the Statutory Residence Test. HMRC needs a live PAYE record before it can issue the NT code, which usually means taking a small taxable withdrawal first, and processing commonly takes around 12 to 16 weeks, so start well before you need the income. Government service pensions typically stay taxable in the UK under a separate treaty article, so check yours specifically.

Budget for the emergency-tax trap on day one. Until the correct code is in place, a first flexible withdrawal is normally taxed under PAYE on an emergency basis, which treats a one-off lump sum as if it repeated every month and routinely over-taxes it heavily. The overpayment is recoverable, either through an in-year reclaim to HMRC or via a Self Assessment return, but the cash-flow hit is real, so take a small first withdrawal rather than a large one. One honest caveat throughout: we advise on the UK side and coordinate with a local adviser in your destination country for the local tax treatment and filings, because how your new country taxes UK pension income and lump sums is a question of its domestic law.

From 6 April 2027, unused pension funds and most pension death benefits in UK registered schemes are included in your estate for UK inheritance tax. The change is already law (Finance Act 2026 received Royal Assent on 18 March 2026) and HMRC's technical note confirms the mechanics: for someone who is not a long-term UK resident, the charge still applies to any scheme established in the UK. Your SIPP is established in the UK, so emigrating does not move it, and outlasting the inheritance tax tail does not free it either.

This is the one factor that genuinely favours the QROPS route for some people. A scheme established outside the UK falls out of the inheritance tax net once you are no longer a long-term UK resident, so a settled emigrant who can transfer without the 25% charge may remove a large future 40% exposure. But run the numbers both ways: the ordinary £325,000 nil rate band, the capped spouse exemption where the survivor is not a long-term UK resident, and the income tax your beneficiaries pay on inherited funds where you die at or after 75 all interact, and a 25% charge paid now to avoid a contingent 40% charge later is often poor value. Our dedicated guide to UK pensions and inheritance tax abroad works through the alternatives, including faster drawdown, gifting and life cover in trust, and you can check when your own tail ends with our IHT tail calculator.

Sequence the decision rather than jumping to a product. First, fix your residence position and departure timing under the Statutory Residence Test. Second, check the pension article of the treaty between the UK and your destination, because if drawdown is taxable only where you live, the NT-code route probably already achieves what a transfer promises. Third, price the April 2027 inheritance tax exposure on your actual pot and family circumstances. Only then compare a specific QROPS, with its exclusion, allowance position, fees and five-year re-testing risk, against staying put. Our relocation planner maps the moving parts by country.

Horizon UK Tax Solutions advises emigrants on exactly this comparison: residence and treaty analysis, NT code and DT-Individual claims, the Overseas Transfer Charge position in writing before anything moves, and the 2027 modelling. We work on fixed fees agreed upfront, with non-resident and expat returns from £550, and where a transfer is on the table we work alongside your regulated pension transfer adviser rather than replacing them.