The overseas transfer charge rules apply to pension savings transferred from UK registered pension schemes to QROPS where the request to transfer is made on/after 09 March 2017.
The principles of the overseas transfer charge rules are as follows:
- A 25% charge is applied to the original transfer from the UK registered pension scheme to the QROPS, unless that transfer meets conditions to be exempt from the charge*; and
- The fund transferred from the UK registered pension scheme to the QROPS is ring-fenced, and monitored during a period of 5 years** after the original transfer; and
- If a charge is applied to a transfer and later in the 5 year period circumstances change***, or a subsequent transfer to another QROPS occurs which meets the conditions to be exempt from the charge, the charge that was previously applied can be reclaimed
- If a charge is not applied to a transfer because it met the conditions to be exempt, and later in the 5 year period a change of circumstance occurs****, or subsequent transfer to another QROPS occurs which does not meet the conditions to be exempt from the charge, the charge becomes due at that point
*One of the following conditions must be met in order for an exemption from the charge to apply:
- The individual lives in the same territory as that in which the QROPS is established; or
- The individual lives in a European Economic Area (EEA) country, and the QROPS is established in an EEA country (does not need to be the same country); or
- The QROPS is a scheme in which the individual’s employer participates, and that scheme is an occupational pension scheme, or a public service scheme, or a scheme set up by an International Organisation (for example, the United Nations).
**The five year period begins on the date of the original transfer from the UK registered pension scheme, and ends on the last day of the fifth tax year following the tax year in which the original transfer was made. For example, if the original transfer was made on 17 April 2017, the five year period will begin on 17 April 2017 and will end on 05 April 2023.
***If a transfer was chargeable, and circumstances arise such that had the new circumstances applied when the transfer was made, it would have been exempt from the charge (e.g. the transfer was to a QROPS in Australia and the member later moves to Australia), the charge that was applied to the transfer can be reclaimed.
****If a transfer was exempt from the charge because of where the individual lives, and a change of address occurs following which neither of the conditions relating to where the individual lives apply (e.g. the member moves to a country that is neither the country in which the QROPS was established, nor in the EEA), the charge becomes due.
For more information on the overseas transfer charge please read ‘QROPS and the overseas transfer charge’.
Case Studies
The following case studies illustrate when an overseas transfer may or may not apply, both at the time of an original transfer from a UK registered pension scheme, and later if there is a change of circumstances or subsequent transfer.
1. Transfers from UK registered pension schemes to QROPS
Shaun
- Shaun has retired from work. In December 2016 he permanently leaves the UK to live abroad.
- Shaun provides his UK pension scheme administrator with an instruction to transfer all of his UK pension value to a QROPS.
Case Study 1
- Shaun makes his transfer request before 9 March 2017
The overseas transfer charge rules apply only to transfers requested on/after 09 March 2017. As a consequence, they do not apply to Shaun’s transfer request.
This is the case regardless of where Shaun resides or works, regardless of where his chosen QROPS is established, and regardless of when he left the UK.
Shaun’s transfer to a QROPS will be tax-free, as long as he has sufficient available lifetime allowance at the time the transfer is made.
Case Study 2
- Shaun makes his transfer request on/after 9 March 2017
- Shaun is resident in Cyprus
- Shaun transfers to a QROPS that is established in any EEA country
Shaun’s transfer is exempt from the overseas transfer charge because both his country of residence (Cyprus) and the country in which his QROPS is established are part of the EEA.
No overseas transfer charge becomes due when the transfer is made.
Shaun’s transfer to a QROPS is tax-free, as long as he has sufficient available lifetime allowance at the time the transfer is made.
If in the next 5 tax years Shaun transfers from his QROPS to another QROPS, or circumstances change, the overseas transfer charge might apply at the time of the transfer/change. See the section on Change of circumstances/subsequent transfers for more information.
Case Study 3
- Shaun makes his transfer request on/after 9 March 2017. Shaun is resident in Cyprus.
- Shaun transfers to a QROPS that is established in a country that is not in the EEA
Shaun’s transfer is subject to the overseas transfer charge because the territory in which his QROPS is established is outside of his territory of residence, and outside of the EEA.
The overseas transfer charge is due when the transfer is made. The charge is 25% of the transfer value.
If in the next 5 tax years Shaun transfers from his QROPS to another QROPS, or circumstances change, the overseas transfer charge might become reclaimable at the time of the new transfer/change. See the section on Change of circumstances/subsequent transfers for more information.
Donna
- Donna works in Qatar, and moves to Qatar to live.
- Donna provides her UK pension scheme administrator with an instruction to transfer all of her UK pension value to her employer’s pension scheme, which is a QROPS. Donna’s instruction is made on/after 09 March 2017, meaning the overseas transfer charge rules apply to her transfer request.
Case Study 4
- Donna’s employer QROPS scheme is established in Qatar
Donna’s transfer is exempt from the overseas transfer charge because both her country of residence (Qatar) and the country in which her QROPS is established (Qatar) are the same.
No overseas transfer charge becomes due when the transfer is made.
Donna’s transfer to a QROPS is tax-free, as long as she has sufficient available lifetime allowance at the time the transfer is made.
If in the next 5 tax years Donna transfers from her QROPS to another QROPS, or circumstances change, the overseas transfer charge might apply at the time of the transfer/change. See the section on Change of circumstances/subsequent transfers for more information.
Case Study 5
- Donna’s employer QROPS scheme is established outside of Qatar, and her employer is the United Nations
Although the territory in which Donna’s QROPS is established is outside of her territory of residence, her transfer is exempt from the overseas transfer charge because her QROPS is a scheme set up by an International Organisation (the United Nations) for its employees.
No overseas transfer charge becomes due when the transfer is made.
Donna’s transfer to a QROPS is tax-free, as long as she has sufficient available lifetime allowance at the time the transfer is made.
If in the next 5 tax years Donna transfers from her QROPS to another QROPS, or circumstances change, the overseas transfer charge might apply at the time of the transfer/change. See the section on Change of circumstances/subsequent transfers for more information.
Case Study 6
- Donna’s employer QROPS is established outside of Qatar, and is an occupational pension scheme
Although the territory in which Donna’s QROPS is established is outside of her territory of residence, her transfer is exempt from the overseas transfer charge because her QROPS is an occupational pension scheme set up by her employer.
No overseas transfer charge becomes due when the transfer is made.
Donna’s transfer to a QROPS is tax-free, as long as she has sufficient available lifetime allowance at the time the transfer is made.
If in the next 5 tax years Donna transfers from her QROPS to another QROPS, or circumstances change, the overseas transfer charge might apply at the time of the transfer/change. See the section on Change of circumstances/subsequent transfers for more information.
Case Study 7
- Donna’s employer QROPS is established outside of Qatar, and is not an occupational pension scheme
Donna’s transfer is subject to the overseas transfer charge because the territory in which her QROPS is established is outside of her territory of residence, and the employer’s QROPS does not meet the conditions to be exempt (i.e. it is not an occupational pension scheme, a public service scheme, or a scheme set up by an International Organisation).
The overseas transfer charge is due when the transfer is made. The charge is 25% of the transfer value.
If in the next 5 tax years Donna transfers from her QROPS to another QROPS, or circumstances change, the overseas transfer charge might become reclaimable at the time of the new transfer/change. See the section on Change of circumstances/subsequent transfers for more information.
2. Change of circumstance/subsequent transfers
2a. The overseas transfer rules applied to a prior transfer but it was exempt from the charge because of the member’s country of residence
Gordon
- Gordon retired, and moved to Spain to live in August 2017.
- In October 2017, Gordon transferred his UK registered pension scheme to a QROPS in Malta, making his transfer request in September 2017. The transfer was exempt from the overseas transfer charge.
Case study 8
- In 2019 Gordon moves to Australia, but retains his QROPS in Malta
Gordon’s move to Australia has occurred in the 5 year period following the transfer from the UK registered pension scheme. His move triggers the overseas transfer charge because he now resides in a territory which is different from the territory in which his QROPS is established, and is not in the EEA.
The overseas transfer charge is due when he moves to Australia. The charge is 25% of the value of the fund in his QROPS relating to the original transfer from the UK registered pension scheme.
Case Study 9
- In 2019 Gordon continues to live in Spain, but transfers his Maltese QROPS to a QROPS in Australia
Gordon’s transfer from the Maltese QROPS to the Australian QROPS has occurred in the 5 year period following the transfer from the UK registered pension scheme. The new transfer triggers the overseas transfer charge because the territory in which the new QROPS is established (Australia) is outside of his territory of residence (Spain), outside of the EEA, and does not meet the conditions to be exempt on employment grounds (Gordon is retired).
The overseas transfer charge is due when the transfer to the Australian QROPS is made. The charge is 25% of the value of the transfer relating to the original transfer from the UK registered pension scheme.
Case Study 10
- In 2019 Gordon moves to Australia
- In 2020, he transfers his Maltese QROPS to a QROPS in Australia
Gordon’s move to Australia and the later transfer from the Maltese QROPS to Australia have occurred in the 5 year period following the transfer from the UK registered pension scheme.
His move to Australia in 2019 triggers the overseas transfer charge because he resides in a territory which is different from the territory in which his QROPS is established, and is not in the EEA.
The overseas transfer charge is due when he moves to Australia. The charge is 25% of the value of the fund in his QROPS relating to the original transfer from the UK registered pension scheme.
The transfer in 2020 from the Maltese QROPS to the Australian QROPS means it is once again true that Gordon lives in the territory in which his QROPS is established.
The transfer in 2020 enables him to reclaim the charge which became due when he moved to Australia.
Case Study 11
- Gordon’s change of circumstance or subsequent transfer occurs on/after 06 April 2024
05 April 2024 is the end of the 5 year period in which the overseas transfer charge rules applied to the fund Gordon transferred from his UK pension scheme back October 2017.
Whatever the change to Gordon’s circumstances on/after 06 April 2024, or whenever after that date he makes a transfer, an overseas transfer charge will not become due.
2b. The overseas transfer rules applied to a prior transfer and a charge was due
Tracy
- Tracy moved to Hong Kong to work in June 2018.
- In December 2018, Tracy transferred her UK registered pension scheme to a personal pension QROPS in Malta, making her transfer request in November 2018.
- The transfer was subject to the overseas transfer charge, which was 25% of the transfer value.
Case Study 12
- In 2020, Tracy moves to Malta
Following her move, which has taken place within the 5 year period following the transfer from the UK registered pension scheme, Tracy lives in the same country in which her QROPS was established.
If this had been the case when the chargeable transfer was made, that transfer would have been exempt from the overseas transfer charge.
The overseas transfer charge that was applied to the prior transfer can be reclaimed.
Case study 13
- In 2020, Tracy transfers from her Maltese QROPS to a QROPS established by her employer. It is an occupational pension scheme
Tracy’s transfer has taken place within the 5 year period following the transfer from the UK registered pension scheme.
Transferring to a QROPS that is an occupational pension scheme set up by the member’s employer is exempt from the overseas transfer charge, and if this had been the case when the chargeable transfer was made, that transfer would have been exempt from the overseas transfer charge.
The overseas transfer charge that was applied to the prior transfer can be reclaimed.
Case Study 14
- In 2020, Tracy moves to China, but retains her QROPS in Malta
Tracy’s move has taken place within the 5 year period following the transfer from the UK registered pension scheme, and living in a territory that is different from the territory in which the QROPS is established results in the overseas transfer charge being due.
However, a new charge does not become payable when Tracy moves to China, because a charge was payable when the prior transfer was made. That charge cannot be reclaimed as a result of Tracy’s move to China.