The government has introduced a 25% charge on Qualifying Recognised Pension Scheme (QROPS) transfers outside the European Economic Area (EEA), which has come into effect on 9 March 2017. The policy aims at boosting the government’s revenue, hoping that it will earn £60 million a year by 2021/22. But it seems to punish expats moving to certain countries.

Who will be affected?

The charge will hit Brits who want to move their private pensions outside the EEA. For example, it will affect those moving to the Middle East, Asia, the Caribbean, Africa or Latin America. The HMRC states: “Individuals and households with UK pension savings who intend to transfer those pension savings outside the EEA to a pension scheme in a country other than their country of residence will be affected by these changes.”

While the tax for QROPS has been the same since 2006, on 8 March the government announced that this will change from now on to create more “fairness in the tax system.” There are about 10,000 and 20,000 transfers to QROPS every year. Any transfers on 9 March or after will be subject to the 25% tax charge, unless certain conditions apply. 

QROPS won’t be taxable under the following conditions: 

1. the individual and the QROPS are in the same country after the transfer

2. the QROPS is in an EEA country 

3. the QROPS is an occupational pension sponsored by the individual’s employer.

The HMRC also clarified that: “Payments out of funds transferred to a QROPS on or after 6 April 2017 will be subject to UK tax rules for five tax years after the date of transfer, regardless of where the individual is resident.”

This will earn the government £65 million in 2017/18, £60 million in 2018/19, £65 million in 2020/21 and £65 million in 2021/22.

What is a Qualifying Recognised Overseas Pension Scheme? (QROPS)

A QROPS is an overseas pension scheme launched in 2006 as the result of EU human rights requirements regarding freedom of capital movement.  It meets certain HMRC requirements, it has a beneficial owner and trustees and receives transfers of UK pension benefits. 

Some advantages of QROPS

Unlike a UK-based pension scheme that has to follow UK regulations and tax laws, QROPS doesn’t have to, that is why it offers British expats a series of advantages: 

1. A QROPS enables expats to establish the pension scheme in a country of their choice without having to reside in that country. It is ideal for UK expats who are residing outside the UK and are planning to retire abroad, but they already have built their UK pension fund.  It is also appropriate for people born outside the UK but who have built their benefits in a UK registered pension scheme, something that enables them to move their pension overseas if they plan to retire outside the UK. A QROPS gives British expats and non-Brits who were employed in the UK to get the best option for their pension savings.

2. A QROPS allows UK expats to transfer their pension into the country (and currency) of their choice while avoiding UK income tax, as long as they are not residents of that country.  This of course depends on the tax laws of the country you live in.

3. There is no tax on assets.  Your pension fund in a QROPS can increase without being subjected to capital gains tax or income tax.

4. According to QROPS transfer regulations, only 70% of your pension fund needs to be reserved as retirement income. This enables you to access up to 30% of your fund without any charges, unlike the 25% charge of a UK personal pension plan.

5. QROPS gives you the choice to take your income at the age of 55 and even earlier in the case of an illness.

6. You can avoid inheritance taxes of up to 55%. Expats can be subject to inheritance tax (IHT) if HRMC confirms that they considered Britain as their home. A lump sum death benefit tax can devour a 55% of your pension funds, so with QROPS not being subject to UK IHT or a lump sum death benefit tax, means that you can transfer funds to your family tax-free.

7. Since a QROPS allows you to nominate beneficiaries, it also makes easier to transfer your wealth, unlike UK pensions where there are many restrictions.

8. With a QROPS you can also safeguard your funds from currency volatility.

9. You don’t have to deal with HMRC’s changes in regulations.

10. QROPS also safeguards your funds against the lifetime allowance (LTA) charge, which can be taxed at 55% if they exceed the LTA.


If you are a foreign national who has worked all their life in the UK and has grown a considerable pension, or you are a British expat, a QROPS pension transfer is perhaps a good option that would protect you from UK taxes and enable you to pass on your wealth to your loved ones easy and fast. However, the government’s 25% charge on QROPS transfers will only affect those expats whose pension schemes are outside the EEA and is seen by the government as a measure, particularly, targeting those who seek to pay less taxes by taking advantage of QROPS