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

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 outof 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, no UK tax would be due on payments received by a Turkish resident, with Turkey having sole taxing rights and taxing between 15% to 35%, if the pension is paid in consideration of past employment or is paid as annuity. Furthermore, 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 payments (at up to 45%) with 2.5% Gibraltar tax on payments and tax in Turkey on the same at between 15% to 35%, if resident in Turkey. 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 payments (at up to 45%). No Maltese tax if Turkish resident, with tax in Turkey (under the DTA) at between 15% to 35%. 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 Turkey

There is a DTA between the UK and Turkey, which states that pensions and other similar remuneration, paid in consideration of past employment and annuities, shall be taxable only in the State of which the recipient is resident. Therefore if resident in Turkey, such income is only taxable in Turkey.

Gibraltar QROPS

Gibraltar QROPS

Gibraltar has no DTA with Turkey, therefore the QROPS pension 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 last 5 years + before payment).

Malta QROPS

Malta QROPS

Malta has a DTA with Turkey, this provides that pensions and other similar remuneration paid to a resident of Turkey in consideration of past employment shall be taxable only in Turkey. This provision also applies to life annuities. If the pension is not paid in consideration of past employment it is also only taxable in Turkey (under the Other Income Article of the DTA). This is useful as we understand that the Maltese Tax Authorities currently do not treat pensions from QROPS as “paid in consideration of past employment”.

There are separate provisions for Government Service Pensions.

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 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.