Can I transfer my UK pension to Malta?

Malta is a popular destination for those hoping to enjoy their retirement in the sun, although it’s worth planning ahead so you can transfer your UK pension and access your hard-earned cash.

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What is QROPS?

A Qualified Recognised Overseas Pension Scheme (QROPS) is an overseas pension scheme approved by HMRC.

They are designed to make pension planning easier for people living abroad or considering moving and who have UK pensions. You need to be at least 55 to open a QROPS account. 

Since 2017, a UK pension can only be transferred to the same jurisdiction where the pension member lives to avoid a 25% transfer tax.

HMRC considers the European Economic Area (EEA) as the same jurisdiction and Malta is within it, so this tax is not applicable. 

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

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

What are the rules for transferring your UK pension to Malta?

To open a QROPS and move your UK pension to Malta, certain regulations must be met. 

Here are six key rules: 

• Your scheme must conform to the definition in the HMRC’s Pension Tax Manual. 
• Your scheme must be an overseas pension created outside the UK and meet the regulations test by being taxed as an occupational scheme in another country. 

• Your scheme must be a recognised overseas pension plan (ROPS). 
• It must pass a benefits tax relief test. 
• Tax treatment applies to residents and non-residents. 
• Benefits are payable from the age of 55, except in the case of illness. 

Your QROPS must also be established in an EEA member state with a double taxation agreement with the UK, but as mentioned, Malta meets these criteria.

From 6 April 2024, the amount transferred to a QROPS will be tested against the overseas transfer allowance. This allowance is set at £1,073,100 (or a higher protected amount if applicable).

If the transfer exceeds this allowance, you may be subject to a 25% overseas transfer charge on the excess.

What are the key benefits of transferring your pension to Malta?

Malta is subject to stringent EU laws, so your pension should be secure.

It also has well-established QROPS that meet HMRC’s criteria, and there is attractive tax flexibility on pension benefits. 

Other advantages include: 

• English is the main language: With English as the official language in Malta, transferring and holding your UK pension will be easy.  

• Double tax treaty: There is a double tax treaty in place, which means you don’t have to worry about being taxed twice on your pension income. 
• Income drawdown: You can start receiving your retirement income at 55, but no later than the age of 75. Your pension is given via drawdown, which means that some of your QROPS fund is used to fund your pension each year while the rest remains invested. 
• Early withdrawal: The retirement age is usually 55, but even so, there is some flexibility in the case of illness or at the discretion of trustees. Exceptions are sometimes made for people in special occupations, such as sports-related professions. 

Are there downsides to transferring your UK pension to Malta?

There are a few disadvantages to using a QROPS.

Most don’t apply to Malta as they are generally connected to conflicts over QROPS legislation outside the Eurozone or language difficulties.

However, a loss of benefits is a major downside. Many final salary or defined benefit schemes offer guaranteed minimum pensions and cost-of-living adjustments linked to an inflation index, but these are not transferable to a QROPS.

Another issue is the possibility of your QROPS being deregistered. A scheme that is now qualified is not guaranteed this status in the future. If your scheme is ‘delisted’, your transferred funds might be vulnerable to taxes you have been carefully avoiding.

If you have any concerns about transferring your UK pension, it’s worth considering expert financial advice.

If the transferred amount exceeds the overseas transfer allowance (£1,073,100 or a higher protected amount) or if you move to a non-EEA country within five years of the transfer, you may face a 25% overseas transfer charge.

This charge is applied to the excess amount or the total transfer amount if not exempt.

The lump sum death benefit allowance (LSDBA) may also be relevant. If you pass away before you turn 75, the LSDBA allows for tax-free lump sum payments from your pension up to the allowance limits.

However, if your QROPS is deregistered or if the pension scheme is not compliant, this benefit may be affected.

Can I access my state pension in Malta?

If you retire in Malta, you are entitled to your UK state pension if you have made sufficient National Insurance payments and are of retirement age.

As Malta is in the EEA, it will rise in line with the UK. 

How can I transfer my pension from the UK to Malta?

To transfer your UK pension to Malta using a QROPS, use these fundamental steps. 

As this can be a complex area, it’s worth considering financial advice.  

Make sure you’re eligible 

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

Choose your QROPS provider in Malta 

It's a good idea to do your research to find a QROPS provider that’s right for you. You should also consider any fees and your investment options among other features. 

Tell your UK pension provider 

You must let your UK pension provider know you intend to transfer your pension to a QROPS in Malta. They will give you forms and other documents you need to complete. 

Complete and submit the transfer forms 

You need to carefully complete the transfer forms - everything must be accurate and include any supporting information that’s requested.  

Finally, you need to submit the completed forms to both providers.

Your UK provider will transfer your pension to the QROPS in Malta, which is subject to approval by HMRC.  

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

Careful planning is essential to make your move to Malta as smooth as possible and ensure access to your pension funds.  

Here are some key considerations: 

• Your property purchase: It‘s a good idea to think about how you plan to buy your new home. Do you intend to use a mortgage, your savings or the proceeds from selling your current home? If you decide to go for a mortgage, a broker may be able to help you work out exactly how much you can borrow and potentially find the right deal for you.
• Notify HMRC: HMRC will need to know the details of your permanent change of location and circumstances. A financial expert can help you notify HMRC of everything they need to know and advise you on your pension arrangements. 
• Inheritance: It's worth writing a will to choose who receives your assets when you die.
• Get insurance: You’ll need insurance cover in Malta, so look for a trusted insurance provider for your property, contents and vehicles, and possibly private medical insurance as well. 

• Open a Maltese bank account: It’s worth opening a Maltese bank account before your move. This will be invaluable for transferring funds before you arrive. 

Ensure you have a fund to help pay for flights, hotels and potentially car hire when looking for your new home. Also, save some money for the transportation of your belongings. 

Get expert financial advice

Transferring your UK pension to Malta can be a viable option for those seeking to enjoy retirement in a sun-soaked location while benefitting from favourable tax conditions.

Malta's status as part of the EEA and its strong regulatory framework makes it an attractive choice for QROPS transfers.

However, it is crucial to navigate potential pitfalls such as the overseas transfer charge and ensure your QROPS remains compliant to avoid unexpected tax liabilities.

Unbiased can quickly match you with a financial adviser for expert financial advice on managing these complexities and making informed decisions about your pension and financial planning.