Do you have a UK registered pension and are you a tax resident in Malaysia?

If so, and your pension remains in the UK, you should be aware of your possible UK tax obligations. Furthermore, benefits could be available should you transfer these pension funds out of the UK to other secure jurisdictions under HMRC’s favourable Qualifying Recognised Overseas Pension Scheme (QROPS) regime.

Tax Options

Leave the Pension in the UK

Leave the Pension in the UK

If the pension remains in the UK, the exemption from UK tax (under the DTA) on any payments applies if it is paid in consideration of past employment. If not paid in consideration of past employment, tax could be due in the UK on the payments (at up to 45%). In both cases there should be no tax payable in Malaysia. However, the fund remains exposed to the UK death benefit charges.

Gibraltar QROPS

Transfer to a Gibraltar QROPS

Transferring to a Gibraltar QROPS for non-UK residents (5 years +) can alleviate UK tax on any payments (at up to 45%) with 2.5% Gibraltar tax on payments and no tax in Malaysia. Furthermore, the QROPS can protect from the UK death benefit charges if non-UK resident (5 years +) and there is no Gibraltar IHT.

Malta QROPS

Transfer to a Malta QROPS

Transferring to a Maltese QROPS for non-UK residents ( 5 years +) can alleviate UK tax on any payments (at up to 45%) with potentially tax due in Malta (under the DTA at up to 35%). No tax in Malaysia on such payments. Furthermore, the QROPS can protect from the UK death benefit charges if non-UK resident (5 years +) and there is no Maltese IHT.

If you leave your pension in the UK

If you leave your pension in the UK

From 6 April 2006 a single set of rules came into effect. Under this system, the tax treatment for all types of approved schemes, including occupational schemes, small self-administered schemes, personal pensions, self-invested pension plans and retirement annuity contracts have been amalgamated into the rules for Registered Pension Schemes. These can be either Defined Benefit or Defined Contribution (DC) Schemes.

DTA between the UK and Argentina

DTA between the UK and Malaysia

Under the DTA between the UK and Malaysia, pensions paid in consideration of past employment to a tax resident of Malaysia and any annuity paid to such a tax resident, shall be taxable only in Malaysia and not the UK.

For pensions not paid in consideration of past employment it is possible that they shall be taxable in both countries.

There are separate provisions for Government Pensions.

Gibraltar QROPS

Gibraltar QROPS

Gibraltar has no DTA with Malaysia, therefore the QROPS payments to you would be taxable in Gibraltar,
currently at a rate of 2.5%.

No UK income tax if non-UK resident (for 5 tax years + or total withdrawals are below £100,000).

No Gibraltar Inheritance Tax.

Protection from UK IHT.

Protection from UK death benefit charges if non-UK resident (and non-UK resident for the last 5 years + before payment).

Malta QROPS

Malta QROPS

Malta has a DTA with Malaysia, this provides that pensions paid to a tax resident of Malaysia in consideration of past employment shall be taxable only in Malaysia. However, if the pension is not paid in consideration of past employment it may be taxed in both countries. We understand that the Maltese Tax Authorities do not treat pensions from QROPS as “paid in consideration of past employment” therefore tax may be due in Malta.

If Malta taxes the QROPS income payments they are taxed at rates of up to 35%.

No UK income tax if non-UK resident(for 5 tax years + or total withdrawals are below £100,000).

No Maltese Inheritance Tax.

Protection from UK IHT.

Protection from UK death benefit charges if non-UK resident (and non-UK resident for the last 5 years + before payment).

Pension benefits

Pension Death Benefits Payment – UK Tax

From 6 April 2015, the UK tax treatment of benefits from DC schemes on death depends, amongst other things, on the age of the member at the time of death (i.e. pre or post 75). From this date, generally, there should be a lower UK tax cost on passing pension value to heirs on death. However, that said there is still a possible current tax rate of up to 45%.

For those that are non-UK resident and have a QROPS the UK tax cost on succession can be less. 

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This general information has been provided on the basis of our understanding of the current legislation in the UK, Gibraltar & Malta as of April 2015. Should any of the information provided be inaccurate, incomplete or misleading, we take no responsibility for any reliance placed on it. We recommend that individuals always seek specialist multi-jurisdictional (where relevant) tax advice so that their individual circumstances can be fully considered.