If you’re already living in Australia and planning to retire soon, it’s likely your UK pension will be a major part of your long‑term retirement income.
Likewise, if you’re living and working in the UK but plan to move to Australia in 2026, your UK-based pension funds will form a key part of your wealth.
If your long-term plan is to spend your retirement in Australia, you will want to consider how best to access your UK pensions and how these funds can be transferred to Australia.
One effective way to do this is by using a Qualifying Recognised Overseas Pension Scheme, commonly known as a QROPS.
Read on to learn what a QROPS is, how it works, and why it may be beneficial if you want to spend your retirement in Australia. You can also find out about some of the key considerations you need to bear in mind before transferring your UK pension funds to an Australian arrangement.
What is a QROPS?
A QROPS is an overseas pension arrangement that has been approved by HMRC to accept transfers from UK pension schemes.
If you’re planning to retire in Australia, transferring your UK pensions to a QROPS is often more advantageous than simply drawing income directly from your UK-based funds.
To transfer to a QROPS, you must be:
- Aged 55 or over (57 from 2028), and
- Resident in Australia.
You can usually transfer:
- UK workplace pensions
- UK personal pensions
- Defined contribution arrangements.
However, you should be aware that the following cannot be transferred to a QROPS:
- Pensions from which you are already drawing benefits
- Unfunded UK government-backed defined benefit (DB) schemes, such as the NHS Pension Scheme
- Annuities purchased with a life insurance company
- Your UK State Pension.
We would stress that, even if you are eligible for a QROPS, the transfer process is not straightforward, and we always recommend you get expert advice.
5 key benefits of using a QROPS to transfer your pension funds to Australia
The differing tax treatment of pensions in the UK and Australia mean there are some real advantages to transferring your pension to a QROPS, if you’re an expat planning to retire in Australia.
1. Using a QROPS creates an advantageous tax scenario
If you draw funds from your UK pension, they are treated as earned income (with the exception of your 25% tax-free cash entitlement) and taxed accordingly.
In contrast, lump sums and income from your Australian superannuation fund are usually tax-free once you reach retirement age.
This means that by transferring your UK pension to a QROPS in Australia, you can create a “win-win” scenario:
- You benefit from UK tax relief on your contributions
- And potentially no tax on withdrawals in Australia.
2. There is no UK tax charge when transferring to a QROPS
If you’re a resident in Australia and age 55 or older, you can usually transfer your UK pension to a QROPS without incurring a UK tax charge.
However, if you were to transfer to a non-qualifying arrangement you could face an HMRC tax charge of up to 55%. So, it’s vital you ensure that your chosen scheme is a formally recognised QROPS.
3. You can reduce your long-term currency risk
If you keep your pension in the UK, you’ll likely need to convert funds from sterling into Australian dollars each time you take income. Exchange rates fluctuate, sometimes dramatically, which can affect the real value of your retirement income.
By transferring your funds to an Australian QROPS, you can mitigate this risk and hold all your retirement funds in the same tax jurisdiction in which you are resident.
4. No Inheritance Tax on Australian pension funds
From April 2027, UK pensions are set to be included in your estate for UK Inheritance Tax (IHT) purposes.
This means that your beneficiaries could pay tax on the value of your pension if they inherit funds remaining in your UK pension when you pass on, even if you are living in Australia.
In contrast, the Australian tax system does not have IHT, so your pension assets may potentially be passed on to your beneficiaries without a tax charge.
For many expats, this is a significant benefit when considering the long‑term impact of where their pension is held. Of course, everyone’s situation is unique, so we would recommend seeking expert advice.
Find out more: How pension and Inheritance Tax policy changes could affect your legacy
5. You may be able to set up your own QROPS through an SMSF
Even if you are eligible to transfer your UK pension to a QROPS, it’s worth noting that the Australian Expatriate Superannuation Fund (AESF) is currently the only retail super fund in Australia listed on the HMRC QROPS register and publicly accepting UK pension transfers.
One flexible alternative is to establish a Self‑Managed Superannuation Fund (SMSF). This is a private superannuation fund where you act as the trustee, giving you more control over your retirement investments. Once that has received HMRC approval as a qualifying scheme, it can then receive transferred funds.
An approved SMSF QROPS gives you:
- Full control over your investment strategy in a single arrangement
- Economies of scale through your consolidated funds
- Access to a wider range of investment choices
- The ability to make personal contributions benefiting from concessional tax rates.
You should bear in mind, however, that the administrative responsibilities of an SMSF can be onerous, and professional guidance is recommended before deciding to set up your own arrangement.
Find out more: QROPS and SMSF: why they are important if you’re transferring your UK pension to Australia
You may need to phase your pension transfer
Australia places limit on the amount you can contribute or transfer into a super fund in any one Australian tax year.
This is governed by the annual Non-Concessional Contribution (NCC) cap. For 2025/26, the cap is AUD $120,000.
This means that you may not be able to transfer your UK funds to a QROPS in a single transaction and may need to phase the transfer over several years.
However, you may be able to make use of the Bring-Forward provisions, which allow you to use the next two years’ worth of your NCC cap. This will currently allow you to contribute up to AUD $360,000 at once.
For more information, please download our definitive guide to UK Pension transfers – bdhSterling Transferring Pensions Guide
It’s important for you to get expert advice
Every expat’s circumstances are different. Your age, type of pension, Australian residency status, and long‑term retirement plans will all influence whether a QROPS is the right choice for you.
Because errors can trigger large tax charge, we strongly recommend that you obtain expert advice before committing to a transfer.
If you’d like to discuss your UK pension transfer options, we’d be happy to help , please get in touch with us.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only, it does not take into account your personal objectives, financial situation, or needs.
Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances.
All contents are based on our understanding of HMRC and Australian Taxation Office (ATO) legislation, which is subject to change.