What Happens to Your UK Pension When You Move Abroad?

Many UK expats lose sight of their State Pension, often assuming that time spent overseas leaves gaps in their National Insurance record and permanently reduces what they’ll receive. In fact, that’s not the case – and you may have more options than you think. 

As is the case for many people living in the UK, the State Pension alone will unlikely fulfil all of your retirement income needs. However, it can be a great backup or base for your retirement savings. 

In 2010, the then coalition government brought in the triple lock to ensure the value of the State Pension did not fall below inflation or the earnings of working people. It ensures that the State Pension increases each year by the highest of inflation, average wage growth, or 2.5%. 

But your State Pension will only rise each year if you live in the European Economic Area (EEA) or in a country that has a social security agreement with the UK. If you move elsewhere, it won’t receive the annual increase. However, if you return to live in the UK, your payments will be brought up to the current rate. 

Even if you remain outside the UK, you can still claim any State Pension you’re entitled to. If you’re already receiving it when you relocate, and the payments go straight into your bank or building society account, they can carry on without interruption. Just make sure you let the Pension Service know before you leave the UK. 

You can read more detail about receiving your State Pension abroad here.

What happens to any private pension pots you have accumulated depends on the type of pension and where you move to. 

But commonly, individuals consider one of the following options. 

You can leave the pension funds in the UK – this is generally considered safer, and should be the default option. You can transfer to an International or UK-based Self Invested Personal Pension (SIPP). Or you can transfer to a HMRC-recognised overseas pension fund (QROPS). 

If you keep your pension funds in the UK, there are a few things could impact them. Your beneficiaries might not get the full value of your fund when you pass away, and your money will still be affected by UK pension rules and tax laws, which can change quickly.  

Because your funds are usually held in GBP, there’s also the risk of exchange rate fluctuations in the future. On top of that, you may have limited say over how your money is invested, with growth options often restricted to those linked to inflation.

If you want to keep your pension in the UK, you might consider moving it into a SIPP. This is a type of pension ‘wrapper’ that holds your investments until you retire and start taking an income. 

It works much like a standard personal pension, but with one key difference – a SIPP may offer greater investment flexibility for some individuals, depending on their needs and objectives. 

With a standard personal pension, your investments are managed for you within a pooled fund you’ve selected. 

A SIPP, on the other hand, lets you choose and manage your own investments – though many people still opt to have an authorised investment manager handle the decisions for them. 

Keep in mind, you could lose some of the benefits attached to your current pension. Getting professional advice before making a transfer is always a wise move.

If you want to transfer your pension overseas, it must be to a ‘qualifying recognised overseas pension scheme’ (QROPS). 

You’ll need to check this with the overseas scheme or your UK pension provider or adviser. If it’s not a QROPS, your UK provider might refuse the transfer – or you could end up paying at least 40% tax on it. 

Even if you do transfer into a QROPS scheme, you may still have to pay 25% tax on a transfer. Whether you pay tax depends on both where the QROPS you transfer to is based and your available overseas transfer allowance – which is usually £1,073,100, according to the UK government, but may be higher if you hold a protected allowance. 

You usually won’t have to pay tax if you transfer to a QROPS set up by your employer – but it’s worth checking with the scheme to be sure. You’ll also avoid tax if you live in the same country where your QROPS is based and the transfer stays within your available overseas transfer allowance. 

There is so much to QROPS transfers, it is never a good idea to go into them without the help of an experienced adviser. 

You can also find out more details about transferring your UK pension in our guide, which you can download here.

Before deciding on any type of transfer, it’s crucial to know whether your pension is defined benefit or defined contribution. 

A defined benefit (DB) pension, often called a final salary pension, provides you with a guaranteed income for life, which usually rises each year to help protect against inflation. 

This works differently from a defined contribution (DC) pension, where you build up a pension pot over time. 

With a DC pension, you decide how to invest the money in your pot and how to take an income from it in retirement. The value of your pot can go up or down depending on how your investments perform. 

Moving from a DB scheme to a DC scheme, including a SIPP, comes with some big risks. 

You’ll lose the guaranteed lifetime income that your DB scheme provides for you and your dependants, along with its built-in inflation protection. 

You’ll also need to cover the costs of running a DC scheme and paying investment managers, which come out of your pension pot. 

On top of that, you’ll have to decide how to invest your money – or pay someone to do it for you – and accept that the value of your pot can go down as well as up. 

This means your retirement income could be lower, especially if your pot loses value, and there’s even a risk of running out of money in your lifetime. 

Before making any changes to your pension arrangements, you should carefully consider the risks – including the potential for reduced benefits, higher costs, tax exposure and the risk of running out of money in retirement. 

It is also important to keep in mind that not all pension transfer options are available in every jurisdiction, and their suitability depends on local regulatory frameworks. 

Getting professional advice before making the switch can help you make an informed decision – and depending on the size of your pension, you might be legally required to do so. Professional advice can help ensure you avoid foreseeable harms. 

We go into more detail about the key considerations around DB transfers in this article.

Key considerations 

• A transfer out of a UK defined benefit pension is unlikely to be in most people’s best interests as you would be giving up guaranteed lifelong income and inflation protection. 

• The value of investments within a SIPP can fall as well as rise, and you may get back less than you originally invested. 

• Transferring your pension overseas may expose you to different tax rules, currency fluctuations and local regulatory risks. These can reduce the value of your pension. 

When deciding what to do with your pension pots, it’s important to consider how they’ll be taxed. Depending on your situation, you could be taxed by both the UK and the country where you live. 

You’ll pay UK tax on your pension if either it’s paid by a UK provider, or you’re considered a UK resident for tax purposes. 

The amount you pay will depend on your total income, and you must let HMRC know if you move abroad. 

If your new country has a ‘double taxation agreement’ with the UK, you might not have to pay tax twice – the agreement will set out where your tax should be paid.

Deciding what to do with your UK pension pots when you move abroad can be a complex and sometimes overwhelming process. 

The rules can vary depending on the type of pension you have, where you’re relocating to, and how you plan to access your retirement income. 

On top of that, tax implications, currency risks, and potential changes in legislation can all affect the long-term value of your pension. 

That’s why it’s essential to get advice from a knowledgeable, qualified adviser before making any decisions. 

At Hoxton Wealth, we can help UK expats navigate the pension landscape with clarity and confidence. 

We’ll take the time to understand your personal circumstances, explain your options in plain language, and create a tailored strategy that works for both your short-term needs and long-term goals. 

Whether that means keeping your pension in the UK, transferring it overseas, or exploring other investment opportunities, we’ll guide you through every step so you can make informed choices to help protect your financial future. 

Disclaimer: This article is for information only and does not constitute personal advice. The rules around pensions and tax are complex and subject to change. 

Hoxton Wealth can accept no responsibility for any losses or liabilities arising from action taken as a result of the information contained in this document.  

The opinions shared here are based on current conditions, which may be subject to changes. 

Any decision to transfer or restructure your pension should be based on regulated financial advice tailored to your circumstances. Hoxton Wealth UK Limited is authorised and regulated by the Financial Conduct Authority (FRN 586130). 

We can advise UK clients and some expatriates depending on local jurisdictional rules. If you live overseas, you should check whether we are able to provide regulated advice in your country of residence. 

If you are outside the UK, you may also need to seek advice from a locally regulated adviser in your country of residence.