This is a question often asked by the estimated 300,000 British expats now resident in SA. Maybe you are one of the thousands of South Africans who have previously worked in the UK and built up some form of UK Pension benefits.
Well the answer is yes, you can transfer a UK pension to South Africa, but only in limited circumstances. We’ll explain more below.
When you or your employer make contributions to a UK pension scheme, you can receive tax relief on that contribution, sometimes up to 45%. Getting tax relief on pensions means some of your money that would have gone to the government as tax, goes into your pension instead. The government get some of this revenue back when you draw your pension as UK pension income is taxable.
The UK government aren’t too keen on this potential tax revenue leaving the country, so the only way to move your pension away from the UK, without incurring significant tax charges, is to transfer to a QROPS.
➤ Find out why MyExpatSIPP is the ideal UK Pension solution for a non-UK resident
Transfer to a QROPS
A QROPS is an abbreviation of the term, Qualifying Recognised Overseas Pension Scheme. It is an overseas pension scheme that HM Revenue & Customs (HMRC) recognises as eligible to receive transfers from registered pension schemes in the UK. To qualify as a QROPS the scheme must meet the requirements set by UK tax law.
The QROPS regime was originally proposed to allow individuals who had worked in the UK, the ability to transfer their UK pension to their new country of residence. However, over time the government saw that QROPS were not being used for their intended purpose and many people were transferring to QROPS in countries with no connection to the individuals, simply to try to avoid UK taxes. This is a reason why the Overseas Transfer Charge was introduced.
From 9th March 2017, transfers to QROPS attract a 25% tax charge but there are exceptions. You will still be able to make a transfer tax free if you are transferring to a qualifying recognised overseas pension scheme (QROPS) and formally requested your transfer before 9 March 2017 or one of the following apply:
- 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
If the scheme you are transferring out of does not receive the correct paperwork, then they are required to charge the 25% on transfer regardless and you will have to apply for a refund via your scheme at a later date. If you are exempt from the charge on transfer, but then your circumstances change within 5 years, such as moving to another country or moving your QROPS to another country, then you may have to pay the 25% tax charge at that point. You can view the QROPS list here.
There is currently just one pension scheme in South Africa that has QROPS status (as of August 2018). This is the ABSA Group Pension Fund. So unless you’re an ABSA employee, or employed by the public sector or an international organisation with a pension scheme that has QROPS status, you’re stuck.
You can try to transfer your pension to a South African pension scheme that doesn’t have QROPS status, however, this would attract a tax charge of over 55% and therefore most UK providers can, and most likely would, block the transfer.
Transfer your pension to a SIPP
If you can’t move your pension to South Africa, you can look at choosing a UK pension plan that is catered to your needs as an expat.
MyExpatSIPP is a UK registered pension scheme that has been designed especially for expats. You are able to manage your pension online with no paperwork to complete, you have a choice of investments managed by Vanguard and BlackRock and perhaps most importantly, we can pay your pension directly into your South African bank account, something a lot of mainstream UK pension providers won’t do.
If you have a number of UK pensions, you should consider consolidating them by transferring them into one, easy to manage online pension. That way you can reduce the fees you’re paying and keep administration to a minimum.
You can complete the online sign up in a matter of minutes and then we do the rest. Speak to us if you have any questions about transferring.