Archived article

Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

Our resident pensions expert explains how the QROPS scheme works
Thursday 16 Jul 2020 Author: Tom Selby

I’m thinking of retiring in Portugal or some other tax advantageous location. I’ve heard about QROPS but I’m unsure how this would work with my SIPP and defined benefit pension. Can you please explain the mechanics?


Tom Selby, AJ Bell Senior Analyst says:

A Qualifying Recognised Overseas Pension Scheme or ‘QROPS’ is a type of pension plan designed for UK residents who want to retire abroad.

You do not have to set up a QROPS if you want to retire overseas – private or workplace pensions can be paid to you wherever in the world you decide to retire.

Anyone thinking about retiring abroad should speak to their pension scheme or provider first to check how they will pay your income. Some will only pay into a UK bank account, for example, while others might pay into an overseas account if you ask.

Some schemes may also charge you extra to pay your pension into an overseas account and your income will be paid in pounds sterling, exposing you to currency fluctuations.


Because a QROPS is established in the country you reside in, you’ll get your pension in local currency and so avoid the uncertainty of exchange rate rises and falls. It may also be easier to keep track of the tax changes in the country you reside, rather than having to constantly monitor the UK’s rules and regulations.


Since March 2017, transfers to QROPS have been subject to a 25% HMRC charge unless any one of the following conditions are met:

• you are resident in the country where the QROPS receiving your transfer is based;

• you are resident in a country in the European Economic Area (EEA) and the QROPS you are transferring to is based in another EEA country;

• the QROPS you are transferring to is an occupational pension scheme and you are an employee of a sponsoring employer under the scheme;

• the QROPS you are transferring to is an overseas public service scheme and you are employed by an employer that participates in that scheme;

• the QROPS you are transferring to is a pension scheme of an international organisation and you are employed by that international organisation.


You will likely need to go through a regulated adviser if you want to open a QROPS. If you do so, make sure you know exactly what you’ll be paying in costs and charges – both for the advice and investing through the new scheme.

If you want to transfer out of a defined benefit (DB) scheme worth £30,000 or more – which would be necessary if you wanted the money to go into a QROPS – UK rules also require you to speak to an adviser first.

It’s worth noting that if you are under age 75 and transfer to a QROPS your fund will be tested against the UK lifetime allowance. This is set at £1,073,100 for 2020/21 and
rises each year in line with Consumer Prices Index (CPI) inflation. Any pension savings above this level will be hit with a charge of 25%.

You can read more about how the lifetime allowance tests work here.


Send an email to with the words ‘Retirement question’ in the subject line. We’ll do our best to respond in a future edition of Shares.

Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.


‹ Previous2020-07-16Next ›