Occupational Pension Transfers: From Workplace Scheme to SIPP Abroad

For UK expats with deferred occupational pension benefits from former UK employers, the question of whether to transfer these benefits to a SIPP is one of the most consequential financial decisions they face. A SIPP offers greater investment control, flexible drawdown, and in some cases better estate planning flexibility. But for defined benefit occupational pensions, the certainty and guarantees of the existing scheme may be extremely difficult to replicate in a SIPP.

This guide explains the process and rules for transferring from an occupational pension scheme to a SIPP when you are living abroad, covering both defined contribution (money purchase) occupational pensions and defined benefit (final salary or career average) pensions.

This is a regulated activity. Nothing in this guide constitutes personalised financial advice. For defined benefit transfers above £30,000, regulated advice from an appropriately qualified pension transfer specialist is a legal requirement.

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Types of Occupational Pension

There are two fundamentally different types of occupational pension, and the transfer rules and considerations differ significantly:

Defined Contribution (DC) Occupational Pensions

These include group personal pensions (GPPs), master trusts (NEST, The People's Pension, Smart Pension), and other money purchase schemes where the pot value depends on contributions and investment performance. The fund value is known and can be transferred straightforwardly to a SIPP.

Defined Benefit (DB) Occupational Pensions

These include final salary schemes and career average (CARE) schemes, where the benefit is a guaranteed income in retirement. The pension is calculated by a formula based on salary and service, not investment performance. To transfer a DB pension to a SIPP, the scheme provides a Cash Equivalent Transfer Value (CETV) — a lump sum that, if invested in a SIPP, must generate equivalent income. This is rarely achievable with certainty and carries significant investment risk.

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Defined Contribution Transfers: Generally Straightforward

If your occupational pension is defined contribution — a money purchase fund — transferring to a SIPP is a relatively administrative process:

1. Open or identify the receiving SIPP. Choose a SIPP provider suitable for your needs as an expat (including ability to manage an overseas resident as a member and, if relevant, to pay drawdown income abroad).

2. Request a transfer quotation from your current occupational scheme. This will confirm the current fund value and whether any exit charges or market value adjustments apply (these are common for with-profits funds and some older legacy policies).

3. Complete the transfer forms. Both the ceding scheme and the receiving SIPP will require paperwork. Some schemes require the transfer request in writing with original signatures; allow for postal delays from abroad.

4. Confirm transfer eligibility. Most deferred occupational DC pensions can be transferred to a SIPP. However, check whether any protected benefits apply (such as a guaranteed annuity rate (GAR) attached to the policy — transferring away from a GAR can be extremely costly).

5. No regulated advice required for DC transfers (unless a GAR or other safeguarded benefit is involved). However, independent advice is still recommended to ensure the SIPP is genuinely more suitable than the existing scheme.

Protected benefits in DC schemes

Some older occupational DC pensions (and group personal pensions from the 1990s and early 2000s) contain guaranteed annuity rates (GARs) — the right to convert the fund into an annuity at a rate that was guaranteed at inception, often far above current market rates. If your occupational DC pension has a GAR, transferring to a SIPP typically means giving up this right, which can be very valuable.

Regulated advice is required for any transfer involving safeguarded benefits (including GARs) where the transfer value exceeds £30,000. Before transferring any old policy, always check whether any guarantees are attached.

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Defined Benefit Transfers: The Regulatory Framework

The advice requirement

For any DB pension transfer where the CETV exceeds £30,000, you are legally required to obtain regulated financial advice from an appropriately qualified pension transfer specialist (holding the AF7 pension transfer qualification, or the withdrawn AF3/G60, alongside a Level 4 diploma) before proceeding. The adviser must provide a Transfer Analysis and Suitability Report. The pension scheme will not accept a transfer request without evidence of regulated advice having been obtained.

This requirement applies whether you are UK resident or living abroad. If you are abroad, you will need to find a UK-regulated adviser (or one dual-regulated in both the UK and your country of residence) to conduct the transfer analysis.

The FCA's starting position

The Financial Conduct Authority (FCA) states clearly that, as a starting assumption, it is unlikely to be in most people's interest to transfer out of a defined benefit scheme. The guaranteed nature of the DB benefit — particularly one with inflation-linking and a scheme surplus or government backing — is extremely difficult to replicate with a DC pot.

Regulated advisers must assess the suitability of the transfer against your personal circumstances, but the FCA's requirement is that the adviser demonstrates why a transfer is suitable, not why it might not be. The burden is on suitability for transfer, not against it.

Advisers who recommend DB transfers without strong evidence of suitability risk regulatory censure from the FCA.

When a DB transfer might be considered

Despite the high bar, there are circumstances where a DB transfer may be worth analysing:

• Severe or terminal ill health. A DB pension pays income for life; if your life expectancy is significantly shortened, the total benefits receivable may be less than the CETV. A SIPP would allow the pot to be passed to beneficiaries as a death benefit.

• No dependants or survivor needs. DB pensions typically include a 50% survivor pension for a spouse. If you are single, divorced, or your spouse has sufficient independent income, the survivor value of the DB pension may be less important.

• Very high CETV relative to benefits. In some circumstances (particularly during periods of low discount rates), CETVs are very high relative to the expected income stream, making the exchange rate unusually favourable.

• Country of residence tax considerations. For expats in countries with very low or nil tax on investment income or capital gains (but income-taxing UK pension income), holding funds in a SIPP and drawing selectively may result in significantly lower overall tax compared to receiving a fixed DB income.

• Employer covenant concerns. Private sector DB schemes carry the risk of employer insolvency and PPF takeover (with associated benefit reductions). For schemes with weak employer covenants, a CETV transfer removes this risk (at the cost of investment risk).

Note: public sector DB schemes (NHS, teachers', civil service) carry sovereign guarantee. The employer insolvency risk is effectively absent. Transfer from public sector DB schemes is almost never advisable from a financial perspective.

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The Transfer Process for DB Schemes

If a transfer analysis is underway:

1. Request the CETV from the scheme. The scheme has a statutory obligation to provide a CETV within 3 months of request. The CETV is guaranteed for 3 months. Note: a transfer cannot proceed on a CETV that has expired.

2. Engage a pension transfer specialist. Ensure they are FCA-regulated and have the relevant transfer qualifications. Obtain and review the Transfer Analysis and Suitability Report.

3. If transfer is recommended: Complete the transfer paperwork. Both the ceding scheme and receiving SIPP will require forms. Allow 3–6 months for the full process (some public sector schemes take longer).

4. If transfer is not recommended: You have three options:

   • Accept the adviser's recommendation and retain the DB pension.
   • Seek a second opinion from another adviser (you are entitled to do so).
   • Proceed with the transfer despite the recommendation (by using the advice, but overriding it — this is legally permissible but unusual, and most SIPP providers will not accept the transfer if the adviser has recommended against it).

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Choosing the Right SIPP for an Expat

Not all SIPPs are suitable for non-UK residents. Key questions when selecting a SIPP as an expat:

• Will the provider accept a member with an overseas address?
• Can drawdown payments be made to an overseas bank account?
• What currency denomination is the drawdown payment made in?
• Are there specific investment restrictions relevant to your circumstances (e.g., holding offshore investments, commercial property)?
• What are the ongoing charges (platform fee, investment dealing charges, drawdown administration fees)?

Some specialist expat-oriented SIPP providers or wrappers are specifically designed for non-UK residents and may offer additional flexibility or understanding of the cross-border context.

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Tax Considerations on Transfer

The transfer of a UK occupational pension to a UK SIPP is a registered pension scheme to registered pension scheme transfer. It is a tax-free transfer — no income tax or capital gains tax arises on the transfer itself.

However, once the funds are in the SIPP, the income tax treatment of withdrawals applies as normal. If you are non-resident, you will need to establish the DTA position for your country of residence before making any drawdown.

Overseas Transfer Charge: If you transfer to a QROPS (rather than a UK SIPP), a 25% overseas transfer charge may apply. Transferring to a UK SIPP does not trigger the overseas transfer charge.

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How Global Investments Can Help

Global Investments helps UK expats assess whether transferring a deferred occupational pension to a SIPP is appropriate for their circumstances. We work with FCA-regulated pension transfer specialists to facilitate the transfer analysis process and, where relevant, select suitable SIPP arrangements for non-UK residents.

We take a rigorous approach: we will not facilitate transfers where the evidence of suitability is weak, and we will provide honest assessments of when retaining the occupational pension is the right decision. If a transfer is genuinely in your interest, we will help structure it efficiently.

Contact us to begin a pension transfer review if you have deferred occupational pension benefits.

Pension transfers are complex and subject to strict regulatory requirements. Capital is at risk in a SIPP. Defined benefit transfers should only be considered after regulated financial advice. This guide is for information only.