Can I transfer my UK pension to India?

Pension transfers from the UK to India have become increasingly popular due to investment opportunities and some favourable tax options.

However, it’s worth doing your research so you can make the most of your hard-earned retirement funds and avoid any pitfalls.

Transferring to other countries: Canada | New Zealand | Malta | Spain | Portugal | Australia

Can you transfer your UK pension to India? 

Most private or workplace pensions are eligible for a transfer to a Qualified Recognised Overseas Pension Scheme (QROPS).

However, it’s important to check as some defined benefit schemes may have restrictions.

There are some significant benefits you could enjoy by transferring your UK pension fund to India.

How do you transfer your UK pension to India? 

If you want to transfer your UK pension and are ready to retire abroad, the first thing you need to do is send your current pension provider a letter of authority. 

This will inform them of your intentions and tell them who will be acting on your behalf.

You’ll also need to request transfer-out paperwork and the transfer value, which you can do over the phone. 

Once you’ve got the paperwork, there is much to consider, and it can take up to six months to resolve. 

If you want assistance with this process, a financial adviser may be able to help and offer advice. 

Transferring a pension can result in complex tax implications in the UK and India, so they can help guide you through this process.

What are the benefits of transferring your UK pension to India? 

You can enjoy a range of benefits by transferring your UK pension to India. 

For example, you can: 

• Avoid up to 45% income tax in the UK, however, you’ll still be liable for specific tax laws in India relevant to your circumstances. Usually, these are still much lower than the UK.
• Avoid up to 45% tax on death benefits depending on the age of death and benefactor.
• Invest in one of the world’s fastest-growing stock markets.
• Invest in growth areas such as Indian technology and equity companies.
• Get your retirement income in Indian rupees and avoid exchange rate fluctuations.
• Get a third of your fund paid in a lump sum across most schemes instead of the 25% available in the UK.

What is a QROPS and why is it important? 

A Qualified Recognised Overseas Pension Scheme (QROPS) is a pension scheme designed to work outside the UK. 

It allows you to transfer your UK-registered pension scheme to an Indian provider without paying UK tax charges. HMRC must approve every QROPS, and they publish a list of eligible schemes twice a month. 

To be eligible, you have to be a UK national who intends to move, or who has already done so.

Most UK pension types can be transferred to a QROPS, except the state pension, which is non-transferable.

From 6 April 2024, any amount transferred to a QROPS will be tested against the overseas transfer allowance (OTA), which is currently set at £1,073,100. Transfers exceeding this allowance may face a 25% overseas transfer charge on the excess amount unless they meet specific criteria.

How does the transfer work?

To transfer your UK pension to India using a QROPS, you should follow these steps. It might be worth getting guidance from a financial adviser before you get started. 

Make sure you’re eligible 

Ensure that your pension meets the criteria for a QROPS in India and that the Indian QROPS is a registered scheme that meets HMRC’s qualifying criteria. 

Choose your QROPS provider in India 

This will involve some careful research, so you choose a reputable provider in India that matches your needs. Look at various aspects such as fees and investment options when doing your research. 

Tell your UK pension provider 

You must let your pension provider know that you intend to transfer your pension to a QROPS in India. They will send you forms and other documents you need to complete for your transfer. 

Complete and submit the transfer forms 

Carefully complete the transfer forms sent by your UK pension provider and the QROPS provider in India. Everything must be accurate, and you must include any requested supporting information. 

Next, submit the completed forms to both providers. Your UK provider will transfer your pension to the QROPS in India, which is subject to HMRC approval.

What are the advantages of a QROPS? 

There are several advantages when you transfer your pension fund to a registered QROPS. 

These include: 

• The tax on your pension income is set at the rate of your country of residence, not the UK rate.
• Your tax-free lump sum, available at 55, is one third instead of 25%.
• There is no inheritance tax payable by your beneficiaries, so your whole pension fund will be available to them when you pass away.
• There’s a good choice of investment options on many QROPS, offering good growth potential for your fund.

What are the disadvantages of transferring your pension to India? 

You could encounter serious issues if you attempted to transfer your UK pension into a fund that is not qualified by HMRC. 

In this instance, your UK pension provider might refuse to release your funds, or HMRC could view the transfer as illegitimate, and you may face a big tax bill.  

Be mindful of the lump sum death benefit allowance (LSDBA), which could affect the tax treatment of any lump sum death benefits.

There are also important costs to consider when transferring and understanding currency fluctuations, when best to move your pension, and the administration fees which will be required. 

One way to avoid this stressful and potentially expensive situation is to use a financial adviser when choosing your QROPS and making the transfer. An adviser will be able to help you select the best provider for your circumstances and avoid scams.

Can I still get access to my state pension? 

When you retire to India, you are still entitled to your UK state pension if you have made sufficient national insurance payments and are of retirement age. But the amount payable will be frozen, so you won’t receive any annual increases. 

As an Indian resident, you may want to have your UK pension converted into Indian rupees. 

However, your payments will be exposed to changes in currency exchange rates, altering the income you receive on a monthly basis. 

What other financial issues should you consider when moving to India?

It’s a good idea to plan ahead before moving to India. 

Here are some key financial considerations:

• Your property purchase: Decide how you plan to finance your new home in India. Will you get a mortgage, use your savings or sell your property in the UK? If you’re getting a mortgage, a broker can work out how much you can borrow.
• Make sure your tax affairs are in order: HMRC needs to know about any permanent changes. A tax expert can help you notify HMRC of your departure, sort out any tax liabilities and provide advice on boosting your pension.
• Inheritance: Once you own a property in India, you should prioritise drawing up a will to make sure you leave your assets to any beneficiaries.
• Sort out insurance: Insuring your new life in India is an essential step. You should ensure you find a good insurance provider to cover your property, contents and vehicles, and consider private medical insurance.
• Open an Indian bank account: Before you move, open an Indian bank account. This will enable you to transfer funds before your arrival. Make sure you have proof of identity. 

Before you move, you’ll need a contingency fund for flights, hotels, and car hire for any house viewings. A removals fund is also advisable, so you can transport your possessions. 

The key to moving to India and transferring your UK pension without any stress is preparation and professional advice. 

With advice, you’ll have a clear idea of what to do, what not to do, and how to avoid punitive tax bills from HMRC.

Get expert financial advice

Transferring your UK pension to India can offer several advantages, including potential tax benefits and investment opportunities.

However, it’s essential to navigate the complexities of this process carefully. 

Ensuring that you understand the tax implications in both the UK and India, and seeking professional advice, will help you make informed decisions and manage your retirement funds effectively. With the right planning, you can enjoy a smooth transition and secure a stable financial future abroad.

Unbiased can quickly match you with a financial adviser for expert financial advice to ensure you receive tailored guidance on transferring your UK pension to India and navigate any associated tax and investment considerations.