How to transfer UK pension to Portugal

Moving to Portugal, or thinking of retiring there? You’ll have a long to-do list to get through as you plan your move abroad, but one thing you mustn’t forget about is your pension.

You might want to transfer it from the UK to Portugal, but is it possible? And how easy is it to do?

We’ll run through everything you need to know here in our handy guide. This includes the steps involved in transferring UK pensions overseas, and info on the potential costs and tax implications involved.

And remember, if you’re looking to move pension savings or other income across international borders, the Wise account is an ideal solution. It offers low transfer fees*, the mid-market exchange rate and a choice of 40+ currencies, as well as being safe and secure for transferring large sums.

Can I transfer my UK pension to Portugal?

You may not be able to transfer your UK private pension directly to Portugal. At least, not in the same way as you can to some other countries.

How it normally works is that you’ll move your UK pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) in the country you’re moving to.

This would mean that it’s on HMRC’s list of approved QROPS schemes. These are designed to make it easier to move pensions abroad - and help expats avoid high transfer fees and taxes. It can often be the only way to transfer a UK pension abroad, as many UK pension providers won’t permit transfers to non-QROPS schemes.

The only snag is that Portugal doesn’t have any schemes on HMRC’s QROPS list at the moment. The workaround is to transfer your pension to a QROPS in another EU country, such as Spain or Malta.¹

Whether or not you can do this depends on the conditions and restrictions of your particular pension scheme. Not all permit overseas transfers.

Whatever your circumstances or retirement plans, it’s important to remember that transferring UK-based pensions abroad can have significant tax implications. These can sometimes be complex and costly, depending on the country you’re moving to.

To help you navigate these, it’s recommended to speak to a pensions or tax specialist to get some expert advice.

Which UK pensions are eligible for transfer to Portugal?

Not all types of UK pension are eligible for transfer to other countries.

If you’re moving your pension to an EU-based QROPS, you should be able to transfer most types of private and workplace pension.

It’s important to check the specific conditions of your pension though - as some have restrictions on transfers.

One pension type you won’t be able to transfer overseas is your UK state pension.

You can still receive your state pension payments while living in Portugal, provided you’re up-to-date with your National Insurance (NI) contributions or meet other eligibility criteria such as having lived or worked abroad.

To receive payments into a Portuguese or international account, you’ll need to apply to the International Pension Centre within 4 months of your state pension age.²

If you have a civil service pension (i.e. as a teacher, NHS worker or police officer), you may face difficulties in transferring it abroad - no matter where you’re moving to. You’ll need to contact your pension provider to find out about your options.

How to transfer your UK pension to Portugal - a step by step guide

There are a few steps involved in transferring a pension overseas. It all starts with checking your pension is eligible for transfer, while also finding a suitable EU-based QROPS scheme to move it to.

Then there’s the paperwork to complete, to initiate the transfer. It could also be a good idea to seek professional financial advice, ideally before you get started.

We’ll run through these steps in more detail in just a moment. But first, a quick explanation of what QROPS is and how it works.

Qualifying Recognised Overseas Pension Schemes (QROPS)

The most crucial part of transferring a UK pension overseas is finding a QROPS. These are pension schemes that have been vetted and approved by HMRC, and which allow UK nationals to transfer their pensions overseas.

Most UK pensions can only be moved to an HMRC-approved QROPS. It may be possible to move your pension to a non-QROPS scheme, but you’ll face a whopping 40% tax bill on the transfer.³ So it’s safe to say, this is best avoided.

It’s important to note though that transferring your pension to a QROPS may not mean you avoid tax charges altogether.

Steps to transfer your pension

Ready to transfer your UK pension to Portugal? Here’s how to do it, via a QROPS scheme based in another EU country.

1 - Find a suitable QROPS within the EU

First of all, you’ll need to find a suitable QROPS in an EU country like Spain or Malta. Although there aren’t any QROPS in Portugal, taking this route will indirectly allow you to move your pension out of the UK and into the EU.

You can quickly and easily check HMRC’s recognised overseas pension schemes notification list here. Handily, it’s sorted alphabetically by country.

2 - Make sure your UK pension allows overseas transfers

The next crucial step is to contact your pension provider to find out if it permits transfers overseas. It should if it’s a QROPS you’re transferring to, but not every type of pension is eligible for transfer outside of the UK.

There may also be conditions, costs or other tax implications you need to know about before setting up the transfer.

3 - Complete the application form for the transfer

Once you’ve found a suitable QROPS, checked your pension conditions and perhaps also spoken to a financial advisor or pensions specialist, the final step is to apply for the transfer.

You’ll need to download and complete Form APSS 263 from the UK Government website. This asks for information such as:

• Your personal details and National Insurance number
• Address and contact information for you in the UK (or your previous UK address if you’ve already moved)
• Details of the QROPS - including the name, address, country in which the scheme is established and regulated and its HMRC reference number
• Your employment details (if relevant)

You’ll need to submit your completed application form to your UK pension scheme administrator to start the transfer process.

It’s really important to provide all the information you’re asked for. If you’re asked for further details, respond as quickly as you can.

If you fail to provide all the requested details within 60 days of submitting your form, your transfer will be taxed at 25% - whether or not you’re exempt from other taxes or charges.³

Timeframes and costs involved

The time it takes to transfer a UK pension overseas varies depending on the processes (and efficiency) of the pension providers involved in both countries. It may also be affected by your personal circumstances, as well as how quickly you respond to requests for information.

To find out more about specific timeframes for your transfer, you’ll need to speak to your pension provider. It could also be worth speaking to the QROPS provider too. Don’t expect it to be super fast though, as pension transfers between countries aren’t straightforward and they usually take at least a few months.

And as for how much it will cost you to transfer a UK pension overseas? There is one main fee you need to know about - the overseas transfer charge of 25%.

If you manage to transfer your pension to an EU QROPS and you’re living within the EU - and stay there for at least 5 years - you shouldn’t have to pay this charge.³

However, you might still be charged this fee if your transfer exceeds your personal overseas transfer allowance (OTA). This is currently set at £1,073,100, although it can differ in some circumstances. If you exceed your OTA, the 25% charge may be payable on the excess.³

Tax considerations of transferring your UK pension to Portugal

When it comes to tax and pensions, things are never straightforward. It can become even more complicated when you’re trying to navigate rules in more than one country.

This is why it’s always a good idea to get some professional advice before transferring a pension to another country.

But generally speaking, here’s what you need to know about tax when you move a UK pension to Portugal.

If you live within the EU at the time of the transfer, you shouldn’t be liable for tax on it. Crucially, you’ll need to stay living in Portugal, the UK or within the EEA for 5 years or you may have to pay that 25% tax.³

Remember though that the 25% tax will still be due on any amount that exceeds your overseas transfer allowance (OTA) of £1,073,100.³

And if you decide to transfer your pension to a non-QROPS (which is usually not permitted, but still technically possible), you’ll pay up to 40% tax on the whole of the transfer amount.³

Save money on pension transfers to Portugal with Wise

After reading this guide, you should have a better idea of how to transfer your UK pension to Portugal.

We’ve looked at the steps, costs and taxes involved, as well as how to get started - and the importance of seeking professional pensions or tax advice.

But it’s also a good idea to think about how you’ll actually receive your pension sum in Portugal. A key consideration is that your pension pot will need to be converted from British pounds (GBP) to euros (EUR).

If you use a local bank account, you could be stung by high currency conversion fees and poor exchange rates. As it’s likely to be a large amount you’re transferring, this could make a serious dent in your retirement funds.

Luckily, there’s a better solution available. Open a Wise account and you can manage your money in 40+ currencies, including GBP and EUR. You can use it to send and receive money internationally, for low fees* and mid-market exchange rates.

This could be hugely useful for transferring your pension between countries, or even for receiving your UK state pension or other UK-based income while living in Portugal.

Sign up with Wise today

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Sources used:

1. Unbiased - Can I transfer my UK pension to Portugal?
2. GOV.UK - State Pension if you retire abroad
3. GOV.UK - Transferring your pension

Sources last checked on date: 25-Sep-2024