All posts
Almost every senior executive I meet in Dubai with a sizeable UK pension has been approached by someone selling a transfer.
The pitch usually arrives wrapped in confidence and a few buzzwords about tax savings, and it almost always skips the one question that actually matters: what are you trying to achieve, and does either option get you there?
So should you transfer a UK pension to a QROPS, or keep it in a SIPP? More importantly, should you transfer it at all?
I worked with a client, an engineer I'll call John, whose previous adviser had already transferred him and his wife into two separate QROPS schemes, with a bond sitting underneath as the investment platform.
An insurance bond is a tax wrapper. So is a QROPS, and so is a SIPP.
Stacking one wrapper inside another rarely helps the client and almost always pads the fees.
In John's case it had quietly created unnecessary charges that funded the previous adviser's commission, on top of a QROPS that was expensive and doing little for him.
The full story of how we restructured it is below, but the broader point holds for any senior executive working through financial advice in Dubai: this decision is rarely about the product. It's about whether the structure fits the plan.
Why the old QROPS playbook is out of date
If you've read anything about QROPS versus SIPPs more than a couple of years old, treat it with caution. Three changes since 2024 have rewritten the calculation almost entirely.
The lifetime allowance, the £1.073 million cap that used to trigger a 55% tax charge on anything above it, was abolished in April 2024.
It's been replaced by a lump sum allowance and a lump sum and death benefit allowance, both still set at familiar-looking figures, but operating on fundamentally different mechanics. QROPS transfers are now tested against a separate overseas transfer allowance instead.
The European Economic Area exemption from the 25% overseas transfer charge was scrapped in the October 2024 Budget.
It's irrelevant for most clients based in Dubai, since the UAE was never in the EEA, but if your QROPS sits in Malta or Gibraltar and you're not resident there, the exemptions you may have relied on have narrowed considerably.
Most significantly, from 6 April 2027, most unused pension funds and death benefits, in both SIPPs and QROPS, will be brought into the scope of UK inheritance tax.
This reverses one of the central reasons people transferred pensions in the first place. We'll come back to this because it changes the calculus for almost everyone reading this.
What replaced the pension lifetime allowance?
The lifetime allowance was abolished on 6 April 2024 and replaced with two new limits: a lump sum allowance of £268,275, which caps how much tax-free cash you can take across all your pensions, and a lump sum and death benefit allowance of £1,073,100, which caps tax-free lump sums paid on death.
There's no longer any overall ceiling on how large your pension pot can grow without triggering a charge, only on how much of it can come out tax-free as a lump sum.
Anyone who previously relied on a QROPS transfer specifically to crystallise benefits against the old lifetime allowance should revisit that reasoning, because the mechanism it was built on no longer exists. HMRC's guidance on the abolition of the lifetime allowance sets out the detail.
The change that matters most: pensions are coming into your estate
For nearly a decade, one of the strongest arguments for leaving wealth inside a pension rather than drawing it down was that it sat outside your estate for inheritance tax. Many financial plans, including some we've built for clients over the years, leaned on exactly that. From 6 April 2027, that argument largely disappears.
Most unused pension funds and death benefits, whether held in a SIPP or a QROPS, will be brought within the value of the deceased's estate for UK inheritance tax purposes, regardless of whether the scheme trustees have discretion over who receives them.
The existing exemption for benefits passing to a surviving spouse or civil partner is being kept, as is the exemption for registered charities.
Outside of that, a pension that was once one of the most tax-efficient ways to pass on wealth could become not as efficient, particularly where it also attracts income tax in the hands of a beneficiary on top of the estate charge.
This doesn't mean every estate suddenly faces a bill. Most won't. But if your financial plan has, at any point, treated your pension as a way to sidestep inheritance tax, that plan needs revisiting before April 2027, not after.
Will my UK pension be subject to inheritance tax from 2027?
For most people with meaningful unused pension wealth, yes, from 6 April 2027 onward, subject to the spouse and charity exemptions.
The rules apply to deaths on or after that date regardless of where you live, since UK-registered pension schemes fall within HMRC's reporting requirements wherever the member is resident.
Personal representatives will become responsible for reporting and paying any inheritance tax due, working with the pension scheme administrator, and the government has built in mechanisms allowing schemes to withhold a portion of the benefit while the position is finalised.
The detail is set out in HMRC's technical note on inheritance tax and pensions, and it's worth reading in full if pensions form a significant part of your estate.
What is a self-invested personal pension (SIPP)?
A SIPP is a UK-registered, defined contribution pension scheme.
Only the contribution is defined, there's no guaranteed income at retirement, and the eventual pot depends on what you've paid in and how it's grown.
SIPPs have become popular for their relatively low cost and broad investment choice, and they remain available to people who've left the UK.
Living abroad does limit some of their advantages, though.
Tax relief on new contributions to a UK-registered scheme is only available for the first five tax years of non-UK residence once you've left, and even then it's capped at £3,600 a year gross.
Access remains flexible from age 55, rising to 57 from 6 April 2028 unless you hold a protected lower pension age, and you can normally take up to 25% of the fund as a tax-free lump sum, capped at the £268,275 lump sum allowance.
For anyone weighing this against the broader question of retirement planning as an expat, the SIPP's main appeal is its simplicity: it stays inside the UK regulatory system you already understand.
What is a QROPS, and what's the myth worth knowing about?
A Qualifying Recognised Overseas Pension Scheme is, structurally, very similar to a SIPP: a defined contribution scheme, but based outside the UK. It can sit in any jurisdiction that meets HMRC's published requirements, and is intended for people who have left, or are planning to leave, the UK permanently.
Here's the warning worth repeating. A QROPS is never described by HMRC as approved or authorised.
Scheme trustees self-certify that the scheme meets HMRC's criteria, and HMRC simply lists schemes it recognises. If someone selling you a QROPS describes it as HMRC-approved, or implies it's a way to empty a UK pension tax-free, treat that as a serious red flag.
HMRC can and does retrospectively charge tax where it believes pension assets have been accessed improperly, and the salesperson making that pitch is rarely the one left holding the bill.
Do QROPS really offer a bigger tax-free lump sum than a SIPP?
Sometimes, but it's more nuanced than the sales pitch suggests.
Depending on the jurisdiction, a QROPS can offer a tax-free pension commencement lump sum of up to 30%, against the SIPP's 25%, capped at £268,275.
But many QROPS jurisdictions are still bound by UK rules where the scheme was funded by a UK tax-relieved transfer, which means the higher percentage often doesn't apply in practice.
And for anyone with older pension types, particularly contracted-in or contracted-out money purchase schemes, the protected tax-free cash they already hold in the UK can sometimes exceed what a QROPS would offer, even at 30%.
This is a detail that gets lost in generic comparisons, and it's exactly the kind of thing that needs checking against your specific pension before any transfer decision is made.
QROPS and the overseas transfer allowance
Under the old lifetime allowance regime, a transfer to a QROPS was tested once against the LTA at the point of transfer, and the fund could then grow without further LTA assessment, which made QROPS genuinely attractive for internationally mobile executives whose pensions were approaching the cap.
That mechanism still exists in a modified form: transfers to a QROPS are now tested against the overseas transfer allowance, currently set at the same £1,073,100 figure.
Transfer more than your available allowance, and a 25% charge applies to the excess.
The structural logic hasn't changed, only the name and the surrounding rules, and given that pensions are now heading into the IHT estate from 2027 regardless of whether they sit in a SIPP or a QROPS, this particular advantage matters less than it used to.
The mechanics are set out in HMRC's Pensions Tax Manual on overseas transfers.
Has the 25% overseas transfer charge changed?
The charge itself, introduced in March 2017, is unchanged at 25% of the transferred value.
What changed in the October 2024 Budget is who qualifies for an exemption.
You're still exempt if you're tax resident in the same country as the QROPS, or if the QROPS is an occupational scheme sponsored by a genuinely multinational employer.
What's gone is the blanket exemption that used to apply to transfers between the UK and an EEA-based QROPS regardless of where exactly within the EEA you lived.
For a Dubai-based executive transferring into a QROPS in your country of residence, this change makes little practical difference. It matters far more for people who've already transferred into an EEA QROPS and subsequently moved outside that country, since the exemption they relied on at the time may no longer protect them if they relocate again.
Should you transfer your UK pension at all?
Before QROPS or SIPP is even the right question, you need to know what kind of scheme you currently hold. There are two broad types: defined benefit and defined contribution.
Defined benefit schemes, sometimes called gold-plated pensions, promise a guaranteed income for life.
They're increasingly rare because of how expensive they are for employers to fund, and if you have one, the starting position should be scepticism about transferring out of it, not enthusiasm. UK law requires anyone considering a transfer out of a defined benefit scheme worth more than £30,000, including into an overseas QROPS, to take advice from an adviser specifically authorised by the Financial Conduct Authority to give UK pension transfer advice.
That requirement exists because these transfers have, historically, gone badly wrong for a lot of people who were sold the idea of more flexibility without being shown what they were giving up.
Defined contribution schemes, including most SIPPs and QROPS, carry no guarantee. What you get depends on what's been paid in and how the underlying investments have performed.
This is where the QROPS versus SIPP question actually applies, and where genuine planning, rather than a generic sales pitch, starts to matter.
What to weigh up before transferring a UK pension
A handful of factors come up in almost every conversation I have with executives in Dubai weighing this decision, and they're worth working through properly rather than skimming.
What happens to my pension when I die?
Defined benefit schemes are often poor at passing wealth to a spouse or children, and in some cases adult children receive nothing at all.
Transferring into a defined contribution scheme, whether SIPP or QROPS, can allow far more to pass to your family, and in some cases the fund can cascade down a generation. That said, the inheritance tax changes coming in April 2027 mean this benefit needs reassessing rather than assumed.
A pension that passes more easily to your family isn't the same as a pension that passes to them free of tax.
How is my pension income taxed, and could I be taxed twice?
Whether you draw from a SIPP or a QROPS, your country of residence and any double taxation agreement with the UK determine how your income is treated.
Where a proper DTA exists, it should prevent the same income being taxed in both places, but claiming that relief correctly, particularly applying for a UK No Tax code so income is paid gross, takes specialist handling.
Get it wrong and you can end up paying more than you need to, or chasing a refund from HMRC for months.
How will currency affect my pension?
If your spending currency isn't sterling, exchange rate movements affect both the value of a SIPP, which is denominated in pounds, and the timing of any conversion from a QROPS paid in another currency.
A QROPS can offer genuine flexibility here if it's structured in your spending currency, but currency risk doesn't disappear, it just moves to a different point in the process.
Can I consolidate multiple pensions into one scheme?
Many executives accumulate several pensions across different employers over a career, often with overlapping fees and overlapping investment exposure.
Consolidating into a single, lower-cost SIPP or QROPS can genuinely improve efficiency, but only if the receiving scheme is actually cheaper and better than what you're consolidating out of, which is precisely the kind of comparison a commission-driven adviser has little incentive to make honestly.
How this played out for John
Coming back to the case I opened with. John's existing structure, two QROPS schemes with an underlying bond, was costing him in opaque charges that funded his previous adviser's commission, with no corresponding benefit.
We didn't default to moving him into a SIPP simply because he'd since relocated back to the UK. We looked at where he intended to retire, his currency needs, and his existing tax-free cash protections, and concluded the QROPS structure itself was still appropriate for his circumstances.
What wasn't appropriate was the provider, or the unnecessary bond sitting in the middle of it.
We moved him to a lower-cost, higher-quality QROPS provider, removed the bond wrapper, introduced a low-cost investment platform, and rebuilt his portfolio around an evidence-based strategy.
The result was a 3.48% reduction in his annual ongoing charges, roughly £27,840 a year on a fund of £800,000, alongside a meaningfully improved long-term investment outlook.
The bigger win, in my view, was less visible on a spreadsheet: a documented financial plan and cashflow model that gave him something to hold onto the next time markets, or his own emotions, tried to talk him out of his strategy.
That last part matters more than people expect.
A large share of someone's lifetime investment return is shaped not by clever product selection but by whether they stay invested through a documented plan, how much of the portfolio is sensibly allocated to growth assets rather than parked defensively, and whether they break faith with that plan the moment a market fad or a market panic tempts them to.
Salespeople rarely talk about this, because there's no product to sell off the back of it.
Where this leaves you
QROPS versus SIPP was never really the question. The real question is what kind of pension you currently hold, what you're trying to achieve with it, and whether the rules that applied when your existing structure was set up still apply today.
For a lot of people they don't.
The lifetime allowance is gone, the overseas transfer exemptions have narrowed, and from April 2027 the inheritance tax treatment of pensions is changing in a way that touches almost every plan built around a pension as a tax-efficient legacy.
This is one of the biggest financial decisions you'll make, and it deserves a proper plan rather than a product pitch. As with any decision about investing for the long term, the structure should follow the strategy, not the other way round.
If you'd like a second opinion on a UK pension or an existing QROPS, book a 15-minute discovery call.
