How Do I Transfer A Pension From India To The UK?

If you’ve been contributing to a pension in India prior to moving to the UK you might be wondering whether you can transfer your Indian pension to a UK pension.

Here we will go through whether it’s possible to transfer an Indian pension over to the UK, and look at the pros and cons of doing this.

You can only transfer a pension from India to the UK if the Indian pension is a Qualifying Recognised Overseas Pension Scheme (QROPS).

In order to be a QROPS a pension scheme needs to follow guidelines set by the HMRC (the UK government’s department for tax collection) that ensure that their conditions sufficiently cohere with UK pension rules that a transfer can be made without you accruing excessive benefits or losses.

At the time of writing (October 2024) there are 28 QROPS in India. You can find a full list of them on the UK government’s website here. This list is updated every two weeks.

Please bear in mind that pension schemes have to consent to being on this list, so your current pension scheme might be a QROPS and not be on this list.

If you’re not sure then ask your current pension provider if they are a QROPS.

If your pension is not a QROPS and you move money out of it then this will count as an unauthorised transfer and you could be taxed anywhere from 50%-55% on any monies taken out of your Indian pension.

You want to avoid this at all costs. If your current (non-UK) pension is not a QROPS then take this to mean that you cannot transfer it to the UK.

Once you have established whether your current (Indian) pension is a QROPS transferring a pension from India to the UK involves the following steps:

• Seeking advice from certified financial advisors in both India and the UK to establish your likelihood in saving money by transferring your pension over. Most UK pension providers will not accept a foreign pension transfer unless it is recommended by certified financial advisors in both the giving and receiving countries.
• Find a pension provider in the UK who is willing to accept the transfer. Most pension providers do not have a blanket rule on whether they’ll accept transfers, and instead look at your existing pension, the amount of money you’re transferring, as well as the number of years you will continue to contribute. I therefore cannot say definitively whether or not a certain provider will accept the transfer so you’ll have to shop around.
• Tell your existing pension provider that you plan to transfer to the UK. Once this request has been made, you have 6 months for the transfer to be completed. So it’s worth finding a pension provider in the UK who is willing to accept the transfer before you notify your Indian provider.

Please bear in mind that it is at the discretion of the Indian Revenue Service whether your pension can be transferred out of the country. Even if both your current and UK pension providers accept the transfer, it can still be blocked by the IRS.

There are a few costs involved with transferring an Indian pension over to the UK. They are:

• Loss of Tax Relief: Any money that you transfer to your UK pension will be taxed as income when you eventually withdraw your money. This is because only pension contributions are tax deductible, and a transfer does not count as a contribution. You’ll also lose any tax relief that you were entitled to under Indian law as your pension (once transferred to the UK) will no longer be under Indian jurisdiction.
• Financial advice: As I said earlier, most UK pension providers will not accept a foreign transfer unless it is made under the supervision of certified financial advisors in both India and the UK. You will have to pay for both of these parties’ time.
• Exit fees: Some pension providers have exit fees associated with transferring your pot to another provider. Check with your current provider if they have any such fees. The longer you have been with your current scheme the less likely there are to be exit fees, but the exact policy will vary from provider to provider.

You may have read articles that talk about a 25% overseas transfer charge for pension transfers. This only applies if you are transferring a pension to a country that you do not reside in at the time of transfer.

So if you are residing in the UK when you transfer your pension over then you will not have to pay this (assuming that you are transferring out of a QROPS).

It’s only worth transferring your pension from India to the UK if you believe that the loss of tax relief is worth having your pension paid out in Pound sterling rather than Rupees.

At the time of writing (October 2024) non-government workers in India can claim tax relief on ⅓ – ½ of their pension contributions. So if you have made significant contributions to your pension in India then it’s unlikely to be worth losing this just to have your pension paid out in Pound sterling.

However, if you are earlier on in your career, and you have not contributed a large amount to your pension, then it may be worth it.

The Bank of England’s target inflation rate is 2%, while India’s Central Bank’s target is 4%. These are always subject to change, but it does indicate that, everything else being equal, there are benefits to having your pension pot in Pound sterling compared to rupees.

One other factor to consider is whether you’d ever plan on returning to India. Unless you are certain you will retire in the UK then I’d recommend keeping your pension in India. If you transfer your pension to the UK and then are unable to transfer it back and you die before your retirement then your pension may be subject to UK inheritance tax (40% for anything over £325,000).

India has no inheritance tax, so an Indian pension inherited by a next of kin residing in India will not be subject to any such tax.

You can only transfer an Indian pension to the UK if your existing pension is a QROPS. Otherwise you will have to pay 50%-55% tax on any transferred money.

The main benefit of transferring your Indian pension to the UK is that your pension will be paid out in Pound sterling rather than in Rupees. The main drawback is that you’ll lose any tax relief on your contributions.

So we’d only recommend transferring your pension from India to the UK if you are earlier on in your career (and have not made a significant amount of pension contributions) and if you plan on retiring in the UK.

If not then you are better off keeping your pension in India and withdrawing the money over to the UK (or whichever country you reside in) once you retire.

This article was written by Charlie Bailey, the Co-Owner of UK accounting firm GoForma.(https://www.goforma.com/)