How to Transfer UK Pension to the Netherlands

Your Existing Pension

The first step is to understand what form of current pension savings you have and how they work before we can determine your overseas scheme options. Generally, people living and working in the UK have at least one of the three basic types of UK pension scheme:

• Workplace
• Private
• State

UK Tax Relief

Every type of UK pension is subject to UK income tax relief which comes in two parts. Firstly income tax on your contributions, and, if you have one, your employer’s top-ups, and secondly, on withdrawal of a 25% lump sum tax-free at pension commencement.

Investment growth on your retirement savings is also tax-free, but you must pay tax on the income from your UK pension. However, not all pensions accrue through investment but sometimes through pensionable service.

The pension providers normally automatically claim basic rate tax relief on your contributions. At the same time, it is sometimes necessary for higher-rate taxpayers to claim this tax relief, often via a self-assessment tax return.

Including tax relief, the maximum annual contribution to any UK pension scheme is £60,000.00.

Workplace Pensions

It has been compulsory since 2012 to enrol employees in a pension plan automatically, but you may have opted out. Your employer usually deducts your contributions to a workplace pension from your pay before tax and, in some cases, tops them up.

If you are not yet retired and need clarification on your workplace pension arrangements, ask to speak with the pension manager at work.

Having more than one occupational UK pension scheme is common, especially if you ever have a change of UK employer. You can always find any workplace pensions you may have lost track of through the Pensions Tracing Service on His Majesty’s Revenue and Customs (HMRC) website. It may be possible to consolidate your various occupational pension plans into one, which is an excellent way to prepare for your retirement years abroad.

Still, you may not necessarily have pension funds to transfer to the Netherlands. It all depends on who your employer is and the pension scheme they offer.

Defined Benefit Scheme

Suppose you have worked as a teacher or for the NHS, armed forces, civil service, or other public sector organisations. You will most likely have a defined benefit (DB) pension plan, often known as a ‘final salary’ or ‘unfunded’ scheme.

Less commonly, some private employers also provide DB pensions. Should the employer become insolvent, the Pension Protection Fund secures up to 90% of your pension. However, you must wait until the state pension age to receive it in that situation.

A DB UK pension scheme guarantees your pension income, often a proportion of your salary, hence, ‘final salary’. Accrual is through the number of years you work, that is, your pensionable service, rather than solely from investment growth.

As you may not have an individual pension fund to move, and because the benefits of a DB plan are difficult to reproduce, I recommend that you speak first with your pension provider or a local UK financial adviser. The DB scheme provider often refuses to make an overseas pension transfer.

Your guaranteed pension income would be exposed to significant risk in the financial markets by transferring to a defined contribution scheme of any kind.

Defined Contribution Scheme

All other registered pension schemes in the workplace will be some form of defined contribution (DC), also called a ‘money purchase’ plan. The provider invests your contributions for you.

How much income you receive when you retire will depend upon the investment performance of your individual pot within the larger pension fund.

Some occupational DC pension providers oblige you to purchase an annuity or other guaranteed income product from your savings.

Small Self-Administered Scheme

Company directors and senior executives of private firms may invest pension savings in a small self-administered scheme, SSAS. We call them small occupational schemes because only up to 11 individuals can take part.

Contributions from the members of an SSAS attract tax relief at each person’s marginal income tax rate. The members become trustees of the pension scheme and can access a wider range of asset classes than a standard pension.

Group Self-Invested Personal Pension, SIPP

Some employers offer group SIPPs as their workplace pension plan. Still, more commonly, they are held by a small set of professionals such as dentists or accountants.

It is possible to use group SIPPs to buy a commercial property for the holders to lease back to themselves. Each individual retains their own SIPP within the group. I will explain more about individual SIPPs below.

Personal Pension Plans

A private or personal pension scheme is a type of defined contribution plan. Lump sums are tax-free at the start of your pension, which can be at least ten years before state retirement age. Your state retirement age depends on when you were born.

Your scheme provider invests the pension fund on your behalf, and its investment performance, minus charges and fees, decides how much money you receive in retirement. You should receive an annual statement summarising how well the investments have grown.

Two of the most commonly held private pension arrangements are stakeholder and self-invested personal pensions.

Stakeholder Pension

A stakeholder pension is a safe and low-cost way to save for retirement. Its annual charges are capped at 1.5% for the first ten years, falling to 1% per year after that.

Every UK stakeholder plan guarantees a free pension transfer option, and you might consider taking advantage of this by transferring to a self-invested personal pension.

Self-Invested Personal Pension, SIPP

A SIPP has several advantages over other pension arrangements, particularly when moving abroad, as they are readily convertible into an international form.

You can often round up all your existing pensions and consolidate them into a SIPP with almost unlimited investment opportunities.

SIPP Investment Options

Here are only a few of the virtually limitless range of investment opportunities you can access with a SIPP:

• Structured products
• Insurance company funds
• Commercial property
• Investment trusts
• Depositary interests
• Unlisted shares
• Exchange-traded funds
• Venture capital trusts

Always research as much as possible and consider working with a financial adviser to identify the best SIPP provider for your circumstances. Watch out for charges, as they can eat away at your pension funds, and check for any exit penalties when transferring your pension into a SIPP. I can help you with this.

UK State Pension

You may be entitled to a UK state pension if you have made ten or more years of qualifying National Insurance payments. These do not have to be consecutive years.

Check your entitlement on the UK government’s new state pension website, where there is further information about the rules and how to increase your income, if applicable.

The UK state pension is not transferable overseas or within the UK, but you can receive your pension benefits regardless.

Why Should I Transfer My Pension To The Netherlands?

There may be no obligation to transfer your UK pension to the Netherlands. Your provider can make payments directly into a bank account in the UK or another country, and you can withdraw the money from ATMs.

However, there are a few reasons why you might find a transfer to an overseas pension scheme more convenient:

• Pension savings held all in one easy-to-manage pot
• Accrue and spend your pension in Euros, reducing currency risk
• Access to a range of overseas investment opportunities
• Potential tax benefits

It can become costly for your pension funds to grow in a different currency from where you will spend it because of fluctuating exchange rates. Transferring to an overseas pension scheme allows you to denominate the currency most relevant to where you live.

Pension Income

A bilateral tax agreement between the UK and the Netherlands is in force, so whether you transfer your pension or not, you should not have to pay tax twice. Still, your residency status determines which country you will pay tax in, and all tax rules are always subject to change.

You must apply for permission to stay in the Netherlands if you are not a Dutch national. However, there is no permanent residency visa scheme for retirement.

Instead, you can apply for Verblijfsvergunning Onbepaalde Tijd, a permanent residence permit. The criteria depend on your situation, but you can qualify by living and working in the Netherlands beforehand.

Other routes to long-term residency are available to citizens of EU member states, European Blue Card holders and nationals of Belgium and Luxemburg. Consult the Immigratie-en Naturalisatiedienst (Immigration and Naturalisation) at the Dutch Ministry of Justice and Security or a reputable migration law firm based in the Netherlands.

UK Income Tax

Moving your pension to an overseas scheme is often the best way to escape UK income tax. Pensions left in the UK may sometimes be subject to the same tax treatment as if you were still a UK resident. Transferring your pension to a pension overseas also protects you from future UK tax law changes.

Options for Transferring your pension to the Netherlands

The two principal ways to transfer your UK pension to the Netherlands are through an international SIPP or to a qualifying recognised overseas pension scheme, QROPS.

Both comply with UK rules governing contributions, withdrawals and lump sums. However, the transfer process to a QROPS can become vastly more expensive and complicated than an international SIPP. Still, depending on your individual circumstances, it can be the right way forward.

Read on to learn how the new rules on the lifetime allowance might affect your choices for overseas pension transfers and when you will have to pay tax on the transfer.

Qualifying Recognised Overseas Pension Scheme

A qualifying recognised overseas pension scheme, or QROPS for short, adheres to the stringent conditions set by His Majesty’s Revenue and Customs (HMRC) to accept overseas pension transfers from a UK-registered pension scheme to a Dutch pension provider.

HMRC update a list of providers twice a month on their website, and it is your responsibility to verify that any overseas scheme you are considering is on that list. Otherwise, your UK provider may refuse the transfer, or you could face painfully high unauthorised payment tax charges or even become the victim of a scam.

Dozens of QROPS based in the Netherlands are on the HMRC list. However, when you move to the Netherlands, a QROPS based anywhere in the European Economic Area can accept transfers from UK pension schemes without triggering an overseas transfer charge. I can help you identify the ideal provider in any EEA country.

Under the earlier rules concerning the lifetime allowance, which is the maximum amount you can hold in retirement savings, if the transfer value of your pension was approaching the limit, then a QROPS was usually the most cost-efficient way to transfer your pension to the Netherlands. However, although the UK government abolished the lifetime allowance in the 2023 spring budget, a change of administration in 2024 may well see it repealed and reinstated.

If your pension pot is under £250,000.00, you should consider an international SIPP.

International SIPPs

Like all UK SIPPs, every international SIPP is regulated by the Financial Conduct Authority (FCA). Your money remains in the UK, and only providers regulated by the FCA may offer an international SIPP.

With an international SIPP, you can move between whichever countries you are permitted to stay in. You do not have to reside in an EEA country permanently but can move beyond the European Economic Area as and when you choose.

How to transfer UK pension to the Netherlands FAQs

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

Overseas pension transfers can be complex. Make sure you take financial advice before you transfer your funds.