QROPS and British Expats Returning to UK



british expats returning to uk

Many clients ask if they should transfer their UK pension to a QROPS even if they think or know that they will return to the UK in the future.  There are a number of reasons why a QROPS should be considered even for British Expats returning to UK:

Avoiding Lifetime Allowance Charge

As discussed in a previous article, a transfer to a QROPS is a Benefit Crystallisation Event and so tested against the Lifetime Allowance (currently £1.25 Million) on transfer.  If you have a pension close to this level you should definitely consider a QROPS transfer in case this level is reduced in the future or further changes are made.

Reduced UK Income Tax on Foreign Pensions

By concession, you will usually only pay tax on 90% of your foreign pension payments as 10% is exempt from tax.

Increased Pension Commencement Lump Sum (“Tax Free Cash”) for British Expats Returning to the UK

As long as you have been outside of the UK for at least 5 complete tax years and you are 55 you can draw 30% from a QROPS instead of 25% from a UK scheme.

Increased Payments to your Beneficiaries

As discussed previously, there is a charge levied on your residual pension value passing to your beneficiaries when you pass away if you are over 75– currently 45%.  The benefit of transferring to a QROPS is that this charge relates to the value of the pension when transferred to the QROPS – the relevant transfer fund.  All subsequent growth of the pension is exempt from this tax.  This can be a highly significant saving per the following example:


UK Pension QROPS
Original Value £300,000 £300,000
Value at death of member over 75 £600,000 £600,000
Taxable Amount £600,000 £300,000
Tax at 45% £270,000 £135,000
Amount to Beneficiaries £330,000 £465,000

Specialist Advice for British Expats Returning to UK

It is imperative that British Expats returning to the UK take financial and tax planning advice in advance of making that move.  This will enable you to ensure that you are not opening yourself up to unnecessary taxation on return.  Contact us today to speak to one of our specialist advisers and make sure that you are planning appropriately.




Graham Brown

The Author

Graham Brown

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