Do you pay tax when you transfer a pension?

Pension transfer tax: a move between registered UK schemes is not taxed, but a transfer abroad or to an unregistered scheme can be taxed at 25% to 55%.

Whether your own move is tax-free turns on where the money is going and what you hold today. Tell an FCA-authorised adviser about your pensions and what you plan to do with them, and they can phone back for nothing once this page's short form is sent.

Pension transfer tax between UK registered schemes

Not on a transfer to another registered pension scheme. HMRC's Pensions Tax Manual says pension rights "can be transferred to another pension scheme without unauthorised payments tax charges if the transfer is a recognised transfer". A recognised transfer goes to another registered pension scheme or to a qualifying recognised overseas pension scheme (a QROPS), and the funds must become held to provide benefits for you. Extra conditions apply when the transfer includes a pension already being paid, which HMRC says includes money in drawdown.

That covers the usual cases: an old workplace pension moved into a new employer's scheme, or a personal pension moved to another provider. How to transfer a pension sets out the steps, and the checks that can slow a transfer are in pension transfer rules. Costs are a separate matter: see pension transfer fees.

Tax free does not mean no consequences. A move can change what you are entitled to later, and a few destinations bring a tax charge. The sections below take each in turn.

When does a pension transfer become taxable?

A transfer is taxed when the money goes somewhere other than a registered pension scheme or a QROPS. GOV.UK says you can transfer to another registered UK scheme, and that sending the pot "anywhere else" is an "unauthorised payment" on which you have to pay tax. The Pensions Tax Manual lists examples: a vehicle that is not a pension scheme, a UK pension scheme that is not registered, or a non-UK scheme that is neither registered nor a QROPS.

Unauthorised payments carry a 40% charge on the amount. A further 15% surcharge applies when unauthorised payments in a 12-month period generally add up to 25% or more of your pension rights, which makes 55% in total. Both are free-standing charges, so losses cannot be set against them.

This is the tax trap behind many pension scams. On early-release offers the FCA says that if you take one up, your funds "will be transferred into a scheme set up by the scam, which will often be based abroad". It adds that the tax bill on what you withdraw could be 55%. Before any transfer, ask your current provider to confirm that the receiving scheme is registered with HMRC, and read the FCA's pension scams page.

Is there tax on transferring a pension abroad?

It can be 25%. GOV.UK's guidance on overseas transfers says a UK scheme may refuse a transfer to anything other than a QROPS, or you "have to pay at least 40% tax on the transfer". For a QROPS, the overseas transfer charge is 25%, and whether it applies depends on where the QROPS is based, where you live and your overseas transfer allowance, which is usually £1,073,100.

If you are not exempt from the charge, the 25% applies to the whole amount. If the transfer is otherwise exempt but goes over your allowance, it applies only to the excess. You usually pay no tax on a transfer to a QROPS provided by your employer. Move countries within 5 years of the transfer and the position can change: moving away from the QROPS country means 25% tax, while moving to it earns a refund.

One rule changed in October 2024. At Autumn Budget 2024 the Government announced the end of the overseas transfer charge exclusion for transfers to QROPS in the EEA and Gibraltar, and HMRC's policy paper says it "will no longer apply to transfers to QROPS established in the EEA and Gibraltar made on or after 30 October 2024". Before then, a UK or EEA resident could usually make such a transfer without the charge, so an older guide that says so is out of date. Living in the same country as the QROPS still brings an exemption, within your overseas transfer allowance.

The QROPS rules, including the reporting period, are covered in HMRC's QROPS rules, and the wider picture of moving a pension out of the UK is in transferring a UK pension to another country. Tax on a move abroad depends on country, scheme and residence, so ask the adviser those three questions on the call-back the enquiry form arranges.

Can a transfer cost you tax-free cash or a protected pension age?

It may. Among the things GOV.UK says a transfer may cost you: any right to take benefits from a particular age, a fixed or enhanced protection, and any entitlement to tax-free cash above a quarter of the pot. Your own providers can say which of these apply.

Two protections have their own rules. HMRC says scheme-specific lump sum protection is lost on a transfer unless the transfer is a block transfer: a single transaction moving all the rights of you and at least one other member to one receiving scheme, which you must not have belonged to for more than 12 months before the transfer. A protected pension age that lets you take benefits before 55 is also lost on a transfer, unless the transfer is a block transfer or is made to a scheme where you already hold a protected pension age. The new protected pension age linked to the rise to 57 in April 2028 has its own HMRC rules. Moving only part of a pension is a partial transfer, which cannot be a block transfer. Block transfers have their own page.

If you think you hold either protection, ask your scheme to confirm it in writing before you request a transfer.

What about tax when you take cash instead of transferring?

Taking money out is where most people meet pension tax. GOV.UK gives the usual tax-free share as 25% of what is built up in a pension, and £268,275 as the most you can take across all your pensions; a protected allowance may raise that. Any lump sum above your allowances brings an Income Tax bill on the extra.

For taking the 25% before or after a move, see taking 25% and transferring the rest, transferring a drawdown pension and when you can take your pension. For a final salary pension, read whether to transfer a final salary pension first, as giving up guaranteed benefits is a bigger question than the tax.

Pension transfer tax in brief

Can I transfer my pension without paying tax?

Yes, if it is a recognised transfer to another registered scheme, which HMRC says carries no unauthorised payments charges. Ask the new provider to confirm that it is registered before you start.

Is there a tax limit on the value of a pension transfer?

GOV.UK gives the overseas transfer allowance, usually £1,073,100, for transfers to a QROPS; an otherwise exempt transfer pays 25% on anything above it. Between registered UK schemes, what matters is that the move is a recognised transfer.

Do I pay tax if I move my pension abroad and then return?

The overseas transfer charge and the 5-year rule can still apply to the original move. If you are thinking of bringing a pension home, see moving a QROPS back to the UK.

Could an offer to move my pension be a scam?

Yes, and the tax bill is part of the damage. The FCA lists guaranteed returns, high-pressure sales tactics and unusual investments among the warning signs. Should an unknown firm offer to take your pension, speak to an FCA-authorised adviser first, using the call-back form to arrange a chat.