How To Take Your Pension Out Of The UK

This article is intended for British expats with UK pensions who wish to explore routes to take their assets outside of the UK.

Protect Your UK Personal Pension From IHT

In the Autumn Budget of October 2024, the Chancellor announced significant changes to the inheritance tax (IHT) treatment of UK pensions. From April 6, 2027, unused pension funds and death benefits will be included in an individual’s estate and subject to IHT. This marks a major shift, as pensions will no longer be exempt from the 40% IHT above the nil-rate band of £325,000. 

For UK expats living abroad, estate planning is crucial when it comes to your finances. Ensuring that your wealth is passed on tax-efficiently is essential to protecting your heirs from significant tax burdens. Previously, pensions were one of the most effective ways to transfer wealth without triggering IHT, but this is no longer the case. 

British expats must now explore ways to mitigate this tax liability, review their financial plans, and take proactive steps to protect their pension pot from tax. Our guide will assess the options available to you.

Taking Your UK Pension Fund Overseas | QROPS

UK expats previously had the option to move their pension pot overseas to a QROPS (Qualifying Recognised Overseas Pension Scheme). Whilst this is still technically possible, it is no longer a viable option for most expats due to further significant changes announced in the Autumn Budget of 2025. 

These changes include an amendment to the overseas pensions criteria, which now imposes an Overseas Transfer Charge of 25% on the total pension fund value if the expat is not a tax resident in the same country where their QROPS is based. As a result, UK expats living in Spain, Portugal, France, and other EEA countries will face this hefty charge, which is frankly unaffordable for most retirees. 

This effectively means that transferring to a QROPS is no longer an option for the majority of UK expats abroad, except for those residing in Malta or Gibraltar, where most QROPS are based.

UK Pension Pot Withdrawal | Solutions for Expats

If the changes to how IHT is applied to pensions in the UK are causing you to consider moving your pension funds from the UK, one option to explore is to fully drawdown the money from your pension.

Depending on your country of residence, you may have access to lower tax rates or more favorable tax rules for pension income than those available in the UK. In some cases, rather than receiving regular pension payments, you may be able to withdraw the full amount in a lump sum at a lower tax rate. Once withdrawn, you can reinvest the capital in a locally compliant, tax-efficient investment product offered in your country of residence. 

For example, in France, the Assurance Vie offers a highly tax-efficient investment solution to expats, reducing capital gains and inheritance tax implications. In Spain and Portugal, many UK expats take advantage of locally compliant investment bonds, which can offer lower tax rates to protect your retirement income. 

Offshore bonds or international investment accounts may also be viable options for expats in certain jurisdictions. Our advisers can help you determine the best solutions based on your location and financial goals. 

It’s important to note that this strategy may only be effective for expats living in countries that have a Double Taxation Agreement (DTA) with the UK.

Expat Financial Planning | Flexible Income Retirement Options

With the upcoming changes to how UK pensions are treated for IHT, ensuring you have proper estate planning in place is essential to protect your family and loved ones from unnecessary tax implications. 

Planning ahead now will help safeguard your wealth before the new pension taxation rules take effect in April 2027. Working with financial advisers who specialise in cross-border planning can provide a tailored assessment of your personal circumstances and financial objectives, allowing you to implement the most efficient strategy to protect your wealth. 

At The Wealth Genesis, we are fully independent- meaning we can advise on the entire market without being tied to any financial products or pension providers. Our team is multijurisdictional and regulated to provide expert guidance to UK expats worldwide. We operate on a fully transparent, flat-fee basis with no hidden costs or commissions- just honest, reliable advice. To find out how we can help you protect your pension savings, book a free discovery call today.