Pension Assets on Relocation: SIPP, QROPS, 401(k) and the Destination Country

Relocating a wealthy family is normally broken down into familiar layers: the visa, tax residency, the ownership structure for the assets, the banking perimeter. Pension savings usually sit at the bottom of that list, and often they are forgotten altogether. The reason is psychological: a pension feels like something twenty years away, while the visa deadline is burning right now. Yet the pension tail is built so that almost every decision about it is taken inside a narrow window around the moving date, while the consequences surface decades later, when nothing can be undone.

The mechanics are simple and unpleasant. A pension wrapper is a relief granted by one particular tax system to one particular resident. When residency changes, the wrapper stays behind in the old jurisdiction while the person ends up in a new one, where the local revenue is under no obligation to recognise someone else's relief. What follows is arithmetic for three parties. The source country may withhold at source, the residence country may tax the payment under its own rules, and the tax treaty either separates those claims or simply fails to cover this particular type of payment. How those two sides look jurisdiction by jurisdiction — what the country of departure does and what the country of arrival demands — is collected in the relocation matrix.

The UK leg: a SIPP can be kept, but it freezes

A SIPP does not go anywhere when you leave. A non-resident can keep it, the account carries on investing, and the relief inside the wrapper survives. What breaks is the entrance. Entitlement to tax relief on contributions is tied to being a relevant UK individual — that is, to having relevant UK earnings subject to UK income tax. Once the person has gone and there is no UK salary, there is no right to relief.

There is a transitional concession that is often mistaken for a full-blown allowance: someone who was UK resident in one of the previous five tax years and joined the scheme while resident may pay in up to £3,600 gross a year with relief. It is the tail of the old entitlement: nothing serious can be accumulated through it. After it relief stops altogether, and many providers stop accepting personal contributions at all, because their operating model is built around relief at source.

The 25% tax-free lump sum is a story of its own. From 6 April 2024 the lifetime allowance was replaced by a Lump Sum Allowance of £268,275: up to a quarter of the pot can be taken free of UK tax within that ceiling. The trap is that "tax-free" here means "tax-free in the UK". The country of the new residence is not obliged to respect the British characterisation of the payment and may well tax the entire lump sum as ordinary income. Do not count on the destination country replicating the UK exemption.

The key parameters of the pension tail on relocation, in one table.

Each of these is unpacked below, on the departure side and on the arrival side.

QROPS: the window that closed on 30 October 2024

The only way to move a UK pension abroad is into a QROPS — a qualifying recognised overseas pension scheme — and such a transfer attracts the Overseas Transfer Charge at 25% of the amount transferred. The charge does not apply if one of the exclusion conditions is met, and the main one reads as follows: the member is resident in the same country in which the scheme is established.

Until the Autumn Budget 2024 a second and far broader exclusion was available: a transfer to an EEA or Gibraltar scheme where the member was resident in the UK or the EEA. It was abolished on 30 October 2024, on Budget day itself. The transitional rule is narrow: there is no charge only where the transfer was requested before 30 October 2024 and completed before 30 April 2025. The Treasury's logic was to shut down a structure in which a UK resident picked up a second helping of tax-free allowance without going anywhere.

The practical consequence is that "transfer the pension to Malta, live in Portugal" is no longer free and now costs a quarter of the capital. There is also a separate ceiling — the overseas transfer allowance, pegged to the lump sum and death benefit allowance of £1,073,100 — and anything above it is charged at 25% even where an exclusion applies. Nor is the charge finalised at the moment of transfer: if the person leaves the country in which the scheme is established within five tax years, the exemption falls away retrospectively. A change of residence must be reported to the provider within 60 days.

2027: unused pension funds enter the estate

This is the biggest shift in the UK pension landscape in a decade, and it is no longer a proposal: the rule was enacted by the Finance Act 2026. From 6 April 2027 unused pension savings and most death benefits are brought into the estate for inheritance tax. Until now a pension was close to a perfect wrapper for passing capital on — outside the estate, outside the 40%. From 2027 that ends.

Death in service benefits, dependants' scheme pensions and continuing annuities are carved out; the spouse exemption works as usual. Reporting and payment fall on the personal representatives, who may direct the scheme administrator to withhold up to 50% of a payment for up to 15 months.

For anyone relocating, the second layer is the critical one — the link to long-term resident status. From 6 April 2025 the UK moved from domicile to a residence-based test: an LTR is someone who has been resident for at least 10 of the previous 20 tax years, and an LTR is exposed to IHT on worldwide assets. Anyone outside the test is exposed on UK assets only — and a UK pension scheme is precisely a UK asset. In other words, leaving the country does not by itself take a pension out of the 2027 charge. Add the "IHT tail": after departure the status trails behind the person for anything from three to ten years. This dovetails directly with the trust question: the calculation changes for everyone who planned to leave the pension untouched.

The US leg: the relief does not move with the account

A 401(k) and an IRA can be kept after a move: providers sometimes close accounts for non-residents on compliance grounds, but there is no tax obstacle. What breaks, as in the UK, is the entrance: contributions require earned income inside the US base, and the Foreign Earned Income Exclusion is precisely what removes that income from the base. The conflict is unpacked in the piece on the FEIE and the foreign tax credit.

Beyond that the ordinary rules apply: a 10% additional tax on distributions before age 59½, and RMDs from age 73 on a traditional IRA and a 401(k). A Roth IRA requires no distributions during the owner's lifetime, and its peculiar fate under tax treaties is dealt with separately. A missed RMD costs a 25% excise, reduced to 10% if corrected within a two-year window.

The non-resident specific is withholding. Distributions from a US pension to a non-resident are withheld at a default 30% at source; the rate can be reduced to the treaty rate by filing a W-8BEN with the provider. The familiar W-4P and W-4R do not work here.

The most underrated risk is non-recognition. Under the OECD Model, pensions are taxable in the country of residence (Article 18) and government pensions in the paying state (Article 19). But for that logic to engage, the destination country has to recognise a 401(k) or an IRA as a pension plan. Many do not: France takes a relatively comfortable view, while Spain, Italy and Portugal as a rule tax distributions as ordinary income, ignoring the American deferral. The foreign tax credit offsets only part of this — the effective rate ends up structurally higher.

The mirror layer is reporting. A foreign pension held by a US person is generally reportable on the FBAR and on Form 8938; the thresholds differ by form and filing status.

Rev. Proc. 2020-17 removed the Forms 3520/3520-A obligation for many tax-favoured foreign pensions, but the relief is narrow — conditioned on contribution limits and local reporting — and it displaces neither the FBAR nor Form 8938.

Social security: the record not to lose

Here the logic runs the other way: states have actually agreed with each other. The US has totalization agreements with 30 countries, with two objectives — to avoid paying contributions into both systems at once, and to aggregate periods so that short spells do not vanish. For foreign periods to count towards a US benefit a person needs at least six US credits, roughly a year and a half of work.

In the EU the same role is played by Regulation 883/2004: one country's legislation applies, insurance periods are aggregated, and each country pays a pension in proportion to its own years, comparing the pro rata figure with the calculation under national rules and paying the higher of the two. Periods shorter than a year are not lost — they are picked up by countries with a longer record.

The post-Soviet space is moving in the opposite direction. Russia has denounced the 1992 CIS Agreement on guarantees of pension rights (Federal Law No. 175-FZ of 11 June 2022), and the automatic recognition of service with Russia has stopped working. The Agreement remains in force between the other parties. For anyone who left Russia with an accumulated employment record, this means unpicking pension entitlements by hand, under bilateral agreements where those survive.

The destination country: relief for an investor and relief for a pensioner

Sixteen destinations on common axes. The first three columns answer "what will the pension cost here"; the last two answer the question that gets forgotten — what happens to the contribution record and to medical cover once the salary that paid for both has stopped.

Three groups come out of the rate column, and they are priced very differently. A dedicated pensioner rate exists in four places: Cyprus at 5% above €5,000, Greece and Italy at 7%, and Malta at 15% on what is remitted. These are the only rows where the destination has written a number specifically for this income. A general absence of tax covers the UAE, Monaco, Panama, Costa Rica, Uruguay and, in substance, Malaysia and Switzerland — the pension is untaxed not because it is a pension but because the system does not reach foreign income, or does not tax income at all. Ordinary rates apply in Portugal after the IFICI reform and in France, which means the two countries that spent a decade collecting European retirees now tax them on the normal scale.

The cheapest number is not the cheapest outcome. Cyprus at 5% looks better than Italy at 7%, but the Cypriot election is annual and must be recomputed each year: on a modest pension the ordinary scale with its tax-free band wins. Italy's 7% is fixed for ten years and requires living in a municipality of up to 30,000 people in the south. Greece's 7% runs fifteen years and requires the 31 March filing. And a zero in the UAE or Monaco is bought with no social-security coordination at all and a private health policy — costs that sit outside the tax column and grow precisely with age.

The last two columns are where the arithmetic usually goes wrong. Inside the EU, Regulation 883/2004 aggregates insurance periods and each state pays in proportion to its own years, so moving between Portugal, Cyprus, Greece, Italy, Spain, Malta and France does not break the record. Switzerland coordinates through its agreement with the EU. Everywhere else — the UAE, Israel, Thailand, Malaysia, Panama, Costa Rica, Uruguay and Monaco — the record is preserved only where a bilateral agreement exists, and periods have to be unpicked by hand. For a US person the parallel question is the totalization network, which covers 30 countries.

Does the destination recognise a 401(k) or a SIPP as a pension?

This is the hinge the rate column hides. Article 18 of the Model Convention sends a pension to the state of residence, but that only engages once the residence state agrees it is looking at a pension. Where it does not, the regimes above stop applying: a 5% or 7% line written for pension income does not catch a distribution the local revenue characterises as something else.

The foreign tax credit repairs only part of a non-recognition outcome, because the credit is limited to what the residence state would have charged on the same income. Where the source state has already withheld and the residence state then taxes the gross receipt as ordinary income, the effective rate sits structurally above both headline figures.

Lump sum against annuity

The form of the payment often matters more than the rate. Under the Model Convention pattern a periodic pension follows the residence state, while a specific treaty provision frequently reserves a one-off payment to the source state — and a government service pension stays with the paying state under article 19 regardless. The consequence is practical: the British 25% tax-free lump sum works against British tax and nothing else, so drawing it after becoming Greek or Italian resident lands the whole amount in a local base that may charge 7% on it, while drawing it after moving to Portugal or France lands it on an ordinary progressive scale. The order of operations is therefore decided by the text of the specific treaty, not by the destination's headline pensioner rate.

Portugal is the most instructive reversal. Under NHR 1.0 a foreign pension was exempt outright to begin with; the 10% rate was introduced by the 2020 Budget Law (Lei 2/2020) for those registering from 1 April 2020, while anyone already registered by 31 March 2020 kept the exemption. The regime was deliberately collecting European retirees. Its successor, IFICI, is built around qualified professions: 20% on Portuguese employment income plus an exemption for several categories of foreign passive income — but pensions are not in the relief. For a pensioner the favourable regime has simply disappeared.

Cyprus offers a choice: 5% on a foreign pension above €5,000 a year (the threshold was raised from the previous €3,420), or the ordinary scale. The choice is made afresh every year: article 20 of Law 118(I)/2002 expressly allows an individual, "for each tax year", to elect between the regime of that article and the general rules, and the election is exercised in the annual return. The claim one sometimes meets — that the election is made once for life and is irrevocable — does not match the text of the law. So the sums need redoing regularly: on a modest pension the ordinary scale with its tax-free band comes out cheaper.

Greece and Italy: the two seven-percenters

Greece and Italy are the two "seven-percenters", with different geometry. The Greek regime under article 5B: 7% on all foreign income, up to 15 years, on condition that the applicant was not a Greek resident for 5 of the previous 6 years and arrives from a country with an administrative cooperation agreement; the application is due by 31 March. The Italian one under article 24-ter TUIR: the same 7%, but for 10 years, and on tighter conditions — a foreign pension and a move to a small municipality in the southern regions.

The population ceiling for the municipality was raised from 20,000 to 30,000 by Article 26 of Law No. 34 of 11 March 2026 (Legge annuale sulle piccole e medie imprese, Gazzetta Ufficiale No. 68 of 23 March 2026): it replaced the words «20.000 abitanti» with «30.000 abitanti» in Article 24-ter(1) TUIR and has applied since 7 April 2026; the law contains no separate transitional provision.

Spain: Beckham and the pensioner

The Spanish Beckham regime is built differently from the two seven-percenters, and the mechanics deserve a close reading. Under article 93 LIRPF an impatriate computes tax under the non-resident income tax (IRNR) rules — that is, on Spanish-source income only — with one carve-out: the whole of the employment income obtained by the taxpayer while the regime applies is deemed to have been obtained in Spanish territory. And pensions, under article 17.2 LIRPF, are "in any event" employment income: state pensions and payments to beneficiaries of pension plans are listed there expressly. Put the two together and the common expectation is that a foreign pension in the hands of a Beckham taxpayer is caught at 24% up to €600,000 and 47% above.

The Dirección General de Tributos reads the same provisions the other way, and has done so in binding rulings. In V2039-16 of 12 May 2016 (a Luxembourg occupational plan encashed as a lump sum) and V2919-17 of 14 November 2017 (a UK pension earned in employment between 1972 and 1999), DGT treats a pension for work done before the move as income from an activity carried out before the displacement to Spain: under article 114.2.a RIRPF it is not "obtained during the regime", so the article 93 deeming rule does not reach it, and under article 13.1.d TRLIRNR a pension is Spanish-source only where it derives from employment performed in Spain or is paid by a Spanish resident. A foreign pension for foreign employment, paid by a foreign scheme, is therefore not taxed in Spain at all while the regime applies. The 2023 move to a proportional criterion for deferred remuneration (V0813-23) runs in the same direction: only income for activity performed after the move is deemed Spanish-source.

The price sits on the other side of the border. The same ruling V2919-17 confirms that a Beckham taxpayer is not a treaty resident of Spain — article 4 of the Spain–UK convention excludes persons taxed only on income from Spanish sources — so treaty relief in the paying state is unavailable and the source country taxes the pension under its own domestic rules: a UK pension is taxed under UK rules, not Spanish ones. A government service pension stays with the paying state under article 19 of the Model Convention in any event.

Timing: where the price is actually settled

The main fork is whether to draw before or after leaving. That is a choice of tax point. While you are still resident in the old country its rules apply: the British 25% tax-free works against British tax and against nothing else. Become a Greek or Italian resident and the entire lump sum lands in the local base, where 7% may prove cheaper — and a progressive scale markedly more expensive. The reverse is just as common: a large lump sum in the year of the move breaks the destination regime or creates a split-year problem.

Second, the form of the payment. Lump sums and annuities are taxed under different articles and often under different treaty rules: where a regular pension goes to the country of residence, a one-off payment may well stay with the source country. What has to be checked is the text of the specific treaty.

Third, currency. A pension denominated in sterling, drawn while living in the euro or dollar zone, becomes a thirty-year unhedged currency position. In magnitude it is entirely comparable to the tax risks.

And the things that cannot be deferred at all: notify the provider of the change of residence (for QROPS, within 60 days), file a W-8BEN with the US administrator before the first payment, check your LTR status against the British test, and do the pension arithmetic before the visa is granted.