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 come last on that list — or never come up at all. 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 — or missed — 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. You change residency: the wrapper stays behind in the old jurisdiction while you end 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.
The UK leg: you can keep a SIPP, 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 you have 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. That is not an accumulation tool, it is a tail. 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 your new residence is not obliged to respect the British characterisation of the payment and may well tax the entire lump sum as ordinary income. The British relief and the destination country's relief are two different reliefs, and they rarely coincide.
QROPS: the window that closed on 30 October 2024
The only way to move a UK pension abroad is into a QROPS — a 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 you leave 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 you 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 account moves, the relief does not
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 softens this but does not cure it — 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 (the $10,000 aggregate threshold across all accounts) and on Form 8938 (for those living abroad, $200,000/$300,000 single and $400,000/$600,000 joint). 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 you do not have 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 you need 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, and the automatic recognition of service between member states has stopped working. 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 are different things
Jurisdiction
Treatment of a foreign pension
Duration
Portugal (IFICI)
Pensions excluded from the regime — ordinary progressive rates
—
Cyprus
Annual election: 5% above €5,000, or the ordinary scale
indefinite
Greece (art. 5B)
7% on all foreign income
up to 15 years
Italy (art. 24-ter TUIR)
7% on all foreign income, southern regions and small municipalities
Portugal is the most instructive reversal. Under NHR 1.0 a foreign pension was taxed at 10%, and 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 this is not a change of regime, it is its disappearance.
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 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 you were not a Greek resident for 5 of the previous 6 years and that you arrive 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. In 2026 the population ceiling for the municipality was raised from 20,000 to 30,000.
The Spanish Beckham regime works directly against a pensioner. 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 a foreign private pension in the hands of a Beckham taxpayer most likely falls within worldwide taxation as employment income — 24% up to €600,000 and 47% above. Where a Greek or an Italian retiree pays 7%, a Spanish impatriate pays 24%.
The caveats are substantial, and the question remains contested — but contested on the characterisation of the payment, not on the rate. The regulation (article 114.2.a RIRPF) takes outside the regime any income that remunerates an activity completed before the move; practice does not apply that argument to pensions — Pérez-Llorca states plainly that retirement pensions and payments out of pension plans count as employment income even where the plan was funded by contributions made before arrival in Spain. From there everything turns on the type of payment: a government service pension is left to the paying state under article 19 of the Model Convention, while a one-off encashment of a foreign private plan is frequently treated by Spanish practice not as a pension but as an investment product — in which case the logic of article 93 does not reach it.
Timing: where the price is actually settled
The main fork is whether to draw before or after leaving. That is not a question of convenience but 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, not the general OECD logic.
Third, currency. A pension denominated in sterling, drawn while living in the euro or dollar zone, becomes a thirty-year unhedged currency position. The risk is not a tax risk, but in magnitude it is entirely comparable.
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 — not after.
Sources
United Kingdom — QROPS and the Overseas Transfer Charge