If you’re retiring in the Republic of South Africa but unsure whether or how to transfer your UK pension, read on to discover the most tax-efficient ways to access it.
Once we have your pension scheme details, I can start on the following checklist and manage all the correct paperwork for a smooth and safe transition.
Transferring a UK pension checklist
- Collate existing UK pensions
- Request a CETV (Cash Equivalent Transfer Value)
- Conduct a cost and performance comparison
- Identify the best solution for the Republic of South Africa
- Submit transfer request documentation to the existing and new provider
UK pension transfers can be complex and hazardous, so always seek advice from a qualified specialist. South Africans and British expats should take extra care to ensure their independent financial adviser is licensed internationally, knowledgeable about global markets and experienced with transferring UK pensions because most UK advisers are not.
Beware of poor advice on your pension transfer from any regulated financial adviser based in the UK who is not a specialist in expat finance.
I specialise in international pension transfers and other long-term investment products. I am also an expat with years of experience helping others make tax-efficient savings and investments worldwide, so feel free to contact me to discuss your plans.
UK-Registered Pension Scheme
Before you can decide what to do with your UK pension when you move to South Africa, you must first determine what sort of pension scheme you have.
All company and private UK pensions are eligible for tax relief at your marginal income tax rate, meaning your contributions and their growth when invested are always tax-free. It is common to have multiple schemes, particularly if you have ever had a UK employer.
Unless you opted out, if you are or have been an employee in the UK since 2012, you will likely have at least one occupational plan as employers are obliged to enrol employees in a workplace scheme automatically. You can locate lost workplace savings using the UK government Pension Tracing Service. I can help you consolidate these into an international plan, ready for retirement in South Africa.
Company pension plans are either a Defined Benefit (DB) or a Defined Contribution (DC) arrangement.
If you’ve worked in the public sector, you probably have a DB pension, but they are also found within a few private sector workplaces. This kind of plan is sometimes known as a ‘final salary’ scheme because, upon retirement, it guarantees a proportion of your former salary. It may be ‘unfunded’, in which case there may not be an individual pension pot for you to move.
Discussing your plans with your UK pension provider in the first instance is vitally important if you have a defined benefit scheme. Transferring out of this arrangement, either within the UK or to an overseas scheme, carries a significant threat, and you could inadvertently deprive yourself of much of the retirement income you have worked so hard for.
Every other type of workplace UK pension scheme, and all private arrangements, will be a Defined Contribution (DC) plan and likely suitable for transfer to an overseas pension or other offshore scheme.
With a DC scheme, the UK provider invests your contributions, and the performance of these investments dictates how much money you will eventually receive when you retire. Some may force you to purchase a retirement annuity, reducing the size of your pot in return for a guaranteed income.
If you are still unsure which kind of occupational scheme you have, you can always ask to speak with someone in Human Resources.
Suppose you are self-employed or want to make additional savings for your retirement; you may have arranged a personal pension separately from your workplace. You did not have to be working to have done so. Look for the annual statement summarising how much your pension is worth and find out what scheme it is.
Two of the most popular are stakeholder and self-invested personal pensions (SIPPs). If you have a stakeholder, an affordable plan with funds invested at low risk, consider using its free transfer option by consolidating with any other plans you hold into a SIPP. A SIPP is often the ideal way to access your UK pension from South Africa. Please ask me more about this if you are still determining your plans.
Self-Invested Personal Pension, SIPP
A uniquely flexible wrapper, a SIPP is a UK pension scheme which grants access to a virtually limitless range of funds, barring residential property. It gives you the utmost control over your investing decisions. Tax relief applies as with all UK-registered pension schemes.
Depending on your experience and risk appetite, you may work with a stockbroker, independent financial adviser or other specialist to manage the funds.
There is no obligation to purchase an annuity, although you may choose a SIPP provider offering this. Watch out for fees, as with greater investment flexibility come increased management costs which can eat into your pension savings. I can often help you negotiate these, depending on the size of your pot.
The best thing about SIPPs is the ease with which we may convert them into international products, denominating a robust global currency and holding all your retirement savings in one simple-to-manage pot. Yet your money will remain in the UK under the watchful eye of the Financial Conduct Authority, which safeguards your money and regulates all SIPP providers.
Can I transfer my pension out of the UK?
Most UK pension savings are eligible for transfer to an overseas scheme, but there is no suitable South African pension scheme at the time of writing. However, you may not need to transfer your UK pension to an overseas pension scheme to access it from South Africa.
Qualifying Recognised Overseas Pension Scheme, QROPS
His Majesty’s Revenue and Customs (HMRC) have set up a list of overseas pension providers broadly similar to any UK pension scheme regarding tax, contributions and withdrawals. It is your responsibility to check the list for yourself on the HM Revenue and Customs website to verify that any recognised overseas pension scheme (ROPS) you are considering is included. By doing so, you protect yourself from scams, charges of up to 55% of the fund value and even the potential loss of your pension savings in their entirety.
Currently, no South African scheme meets the exacting requirements of HMRC for inclusion on the list of QROPS or ROPS; this means there is nowhere in South Africa to receive transfers from the UK. However, if you do not mind a 25% overseas transfer charge, consider basing a QROPS offshore in the European Economic Area (EEA). Malta is often the preferred EEA country, and many expats choose a QROPS based there. It can be the right choice in some circumstances.
The pension transfer process to a QROPS can be lengthy, costly and complex. As such, you must review all your options with at least one international transfer specialist before deciding.
Identical in every way to a UK SIPP, the international version caters perfectly to the needs of expats, particularly those moving between different countries. Like all UK pensions, their investment growth is always free of income tax and capital gains tax. Some of the other many benefits include, without limitation:
- Flexible drawdown
- Funds all in one expat-friendly pot
- Reduce currency risk by denominating a solid global currency
- Access the broadest possible range of investment funds
- No overseas transfer charge, however many countries you move between
- Transferring to an international SIPP is often quicker, cheaper and more straightforward than to a qualifying recognised overseas pension scheme
International SIPPs are particularly useful for those whose circumstances change, as unlike a QROPS, there is no requirement to reside in the same financial jurisdiction for any time. If you plan to retire in stages or want to remain internationally mobile after retirement, consider looking into an international SIPP rather than an overseas pension scheme.
Will I lose my UK pension if I move abroad?
Generally, there is no obligation to transfer your pension fund to an overseas scheme when you move abroad. Your provider should agree to make pension income payments directly to the bank account of your choice.
Direct Payment Method
You will have to pay currency conversion costs each time you withdraw from your pension overseas, and, in some circumstances, you may also have to pay tax on those benefits.
Please contact me to discuss accessing your UK pension income from South Africa. You should not feel compelled to transfer your pension fund to an overseas scheme. I can help you access your money overseas without unnecessarily paying tax or undergoing a costly transfer process.
How do I transfer my UK pension to South Africa FAQs
Can you transfer your UK State Pension to another country?
Check your entitlement to the UK state pension on the government’s forecasting website. Here you can also find your state retirement age and, if applicable, how to increase your qualifying National Insurance contributions for more benefits.
Is a UK pension taxable in South Africa?
Contact me if you want my help understanding the tax implications and making cost-efficient suggestions.
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.