A QROPS transfer is one of the most heavily marketed ideas in expatriate finance. The pitch is appealing: move your British pension somewhere friendlier, escape UK rules, and gain flexibility. For an American the pitch runs into three walls in quick succession.
The first is the destination list. The second is a 25% charge that now catches far more transfers than it did. The third is what the IRS has already said about the most popular destination of all. So the question is rarely how to do it well. It is whether to do it at all.
What is a QROPS transfer?
It is the movement of a British pension into an overseas scheme that HMRC recognises. Recognition matters, because a QROPS transfer to an unrecognised scheme counts as an unauthorised payment. The charges on one of those can take most of the pot.
HMRC publishes the list of recognised schemes and updates it regularly.
The HMRC list of recognised overseas pension schemes is public.
Can an American move a UK pension home?
Not through this route. HMRC's published list contains no schemes established in the United States, so there is no recognised American destination for a transfer to reach. American plans are also designed to accept transfers from other American plans rather than from foreign schemes.
That closes the obvious idea before the tax questions even start. A QROPS transfer cannot end in America.
So an American in Britain choosing a QROPS transfer is choosing a third country, not a route home.
What is the overseas transfer charge?
It is a 25% charge on the value of a QROPS transfer, applied unless one of a short list of exclusions fits. The charge exists to stop pensions that received British tax relief leaving the system without a genuine reason connected to where the member lives or works.
Scheme administrators deduct it before the money moves.
HMRC sets out the mechanics in its overseas transfer charge guidance.
Which exclusions still work?
The everyday one is residence. Where you live in the same country as the scheme receiving the QROPS transfer, and the amount sits within your overseas transfer allowance, the charge does not apply. The others cover occupational schemes of a sponsoring employer, overseas public service schemes and schemes of international organisations.
Each is narrow and fact-specific.
None of them helps an American living in Britain who transfers to a third country.
Check which one you are relying on by name. Vague reassurance that your case is exempt is not the same as an exclusion that fits.
| Situation | Charge applies? |
|---|---|
| You live in Portugal and transfer to a Portuguese scheme | Generally no, within the allowance |
| You live in Britain and transfer to a Maltese scheme | Yes, 25% |
| Transfer to an occupational scheme of your own employer abroad | Generally no |
| Transfer to an EEA or Gibraltar scheme on or after 30 October 2024 | Yes, unless you live there |
What changed on 30 October 2024?
The exclusion for schemes established in the EEA and Gibraltar disappeared. Before that date a British resident could make a QROPS transfer to those places without the charge. Transfers made on or after it lose that treatment, leaving residence in the scheme's own country as the practical exclusion.
The stated aim was to stop people gaining a second tax-free allowance while staying in Britain.
Much of the advice still circulating predates the change.
Why does Malta come up so often?
Because it hosted the schemes most aggressively marketed to expatriates, and because its own treaty network looked attractive. For Americans, that history is now a warning rather than a recommendation.
The two countries addressed it directly at competent authority level.
The IRS publishes the Malta competent authority arrangement on pension funds.
What did the United States and Malta agree?
That individual retirement arrangements established under Malta's Retirement Pensions Act are not pension funds for the purposes of the relevant treaty provisions. The definition matters because it feeds several articles, including the ones dealing with residence and with pensions themselves.
Treasury and the IRS later proposed treating certain Malta personal retirement scheme transactions as listed transactions.
That brings disclosure obligations and penalties for failing to disclose.
Listed transaction status matters even to people who owe nothing. It creates a duty to disclose, and penalties attach to the silence rather than to the tax.
Does a QROPS transfer improve your American position?
Rarely, and a QROPS transfer often makes it worse. Your American tax position follows your citizenship rather than the location of the scheme, so moving the pot abroad changes nothing about who taxes you. What it can change is whether treaty protection still applies to the scheme holding your money.
A British registered scheme sits inside a treaty the two countries negotiated.
A scheme in a third country sits inside a different treaty, or outside one entirely.
What is the overseas transfer allowance?
It is the ceiling on how much you can move abroad before a charge applies even where an exclusion otherwise would. Transfers above it face the charge on the excess, so a large pot can carry a bill despite meeting the residence condition.
Previous transfers use it up, so a second move is rarely as clean as the first.
Ask the scheme for your remaining allowance in writing before committing to anything.
Does British tax stop following the money?
Not immediately. Payments out of the receiving scheme can stay within British charging provisions for a period afterwards. So the idea that a QROPS transfer cuts the British cord on day one is simply wrong.
HMRC's guidance on transferring to an overseas pension scheme sets out the conditions.
Check the specific period with the scheme before assuming anything.
What does the American reporting look like afterwards?
Usually heavier, not lighter. A QROPS transfer leaves you reporting a foreign scheme in a third country, and a less familiar structure tends to raise questions rather than settle them.
Where the structure is a trust, additional reporting can follow.
In our practice a transfer has never once simplified an American client's annual filing.
We cover how the two countries tax the payments themselves in Treaty Article 17.
| Question | Stay in the UK scheme | After a QROPS transfer |
|---|---|---|
| Treaty covering the scheme | The US-UK convention | A different treaty, or none |
| UK transfer charge | None | 25% unless an exclusion fits |
| Ongoing UK charging provisions | Apply throughout | Can still apply for a period |
| US reporting | Established and familiar | Often broader, sometimes trust reporting |
| Who pays for the advice | Nobody | Usually you, through the product |
Does the receiving country's treaty help?
Sometimes it helps the local resident, and it rarely helps an American. Treaty benefits generally depend on being a resident of one of the two countries involved, and an American living in Britain is resident in neither Malta nor Gibraltar.
So the attractive treaty in the brochure may simply not be yours to use.
Ask which treaty is being relied on, and who has to be resident where for it to work.
Who does a QROPS transfer genuinely suit?
A QROPS transfer suits someone who has left Britain permanently and settled in a country with a scheme on the list. Living where the scheme lives is what unlocks the main exclusion, and it also means the pension sits in the tax system you actually file in.
An American living in that country still has the citizenship problem on top.
So the population it fits is real, and it is smaller than the marketing suggests.
What happens if the scheme leaves the list?
HMRC removes schemes from its published list from time to time, and that is not a theoretical risk. The list is a notification list rather than a guarantee, and HMRC says plainly that it cannot confirm any scheme on it qualifies.
Where a scheme turns out not to have met the conditions, HMRC says it will usually pursue the resulting charges anyway.
So the list offers far less comfort than its existence implies.
What should you ask before agreeing to one?
Ask who is paid, how much, and by whom. Cross-border pension transfers carry commissions that do not always appear on the illustration, and the fee structure often explains the enthusiasm better than the tax analysis does.
Then ask for the charge position in writing.
Our clients who asked both questions early rarely proceeded.
Ask for the answer in writing, too. A verbal assurance about a 25% charge is not worth the call it came in on.
Thinking it through, step by step
Take these in order. The first two usually settle it without reaching the rest.
- Check whether any scheme in your destination country appears on HMRC's list at all.
- Establish whether you would live in the same country as that scheme.
- Price the 25% charge as though it applies, then see whether an exclusion genuinely removes it.
- Ask what treaty, if any, covers the receiving scheme for American purposes.
- Ask how long British charging provisions continue to reach payments from it.
- Get the total cost in writing, including commission and ongoing fees.
- Compare all of that against simply leaving the pension where it is.
Is leaving the pension in Britain really fine?
For most people here, yes, and it is worth saying plainly because the alternative gets all the marketing. A British registered scheme sits inside the treaty the two countries actually negotiated, with rules both tax authorities recognise.
You keep flexible access, the usual allowances and a familiar reporting position.
Doing nothing is a decision, and here it is usually the right one.
An illustrative example
Take an American in Manchester with a £400,000 SIPP, offered a transfer to a Maltese scheme. She lives in Britain, so the residence exclusion does not apply and a 25% charge would take £100,000 before anything else happens.
On the American side, the competent authorities have already said arrangements of that type are not pension funds for treaty purposes.
She keeps the SIPP. This example is illustrative rather than advice, and her own scheme documents and residence position would decide it.
Her adviser was not being dishonest. The illustration simply predated the October 2024 change and skipped the American analysis entirely.
Common mistakes
First, reading advice written before 30 October 2024 and assuming the EEA route still works.
Second, believing a QROPS transfer moves you out of reach of British rules immediately.
Third, treating a third-country scheme as if the US-UK treaty still covered it.
Fourth, judging the offer on the illustration rather than on the commission behind it.
Fifth, treating the published list as a guarantee. HMRC says it cannot confirm that schemes on it qualify, and it will still pursue charges where they do not.
How US UK Tax Hub helps
We price the QROPS transfer honestly, including the charge, the reporting and what happens to treaty coverage. Most of the time that conversation ends with the pension staying exactly where it is, which is a result rather than a non-answer.
The work sits alongside our treaty relief service, and our note on UK pensions under US rules covers the position if you stay put.
This article is general information, not personal tax or financial advice. Talk to us before signing anything.
