If you’re a UK expat in Portugal weighing up whether to move your pension into a QROPS, the rules changed dramatically on 30 October 2024 — and most of the old advice you’ll find online is now flat-out wrong.

The Overseas Transfer Charge (OTC) is HMRC’s 25% tax on certain transfers from a UK registered pension to an overseas scheme. For nearly eight years, expats living in the EEA could move their pensions to a Malta or Gibraltar QROPS without paying it. That door has now closed. This guide walks you through exactly what the OTC is, what changed in the Autumn 2024 Budget, and what UK expats in Portugal should actually do with their pensions in 2026.

What Is the Overseas Transfer Charge?

The Overseas Transfer Charge is a 25% tax that HMRC applies to transfers from a UK registered pension scheme into a Qualifying Recognised Overseas Pension Scheme (QROPS) when the transfer doesn’t meet specific exemption conditions. It was introduced in March 2017 as part of the Spring Budget, and the original purpose was to stop people using overseas pension structures purely for tax avoidance.

In plain English: if you transfer £500,000 from your UK SIPP into a non-exempt overseas scheme, HMRC takes £125,000 off the top before the money even arrives. You’re left with £375,000 to invest. That’s a brutal hit on a lifetime of pension savings, and it’s why the rules around exemptions matter so much.

The charge is deducted by the UK scheme administrator before the transfer happens, so there’s no escaping it by being clever. If your transfer is in scope, the tax goes to HMRC and there’s no mechanism to claim it back later — even if your circumstances change.

The Old Rules: Why the EEA Exemption Mattered So Much

Before 30 October 2024, four exemptions could shield you from the OTC:

1. The same-country exemption — you and the QROPS were both resident in the same country.
2. The EEA exemption — both you and the QROPS were resident within the European Economic Area (even if in different countries).
3. The employer occupational scheme exemption — the QROPS was an occupational pension provided by your employer.
4. The international organisation exemption — the QROPS was operated by a recognised international body (UN, EU institutions, etc.) or was an overseas public service scheme where you were employed by the relevant body.

The EEA exemption was the one that mattered to most expats. Portugal has never had a QROPS on HMRC’s recognised list, so a “same-country” Portuguese QROPS has never been a realistic option. Instead, expats here typically used a Malta-based QROPS — and because both Portugal and Malta were inside the EEA, the EEA exemption applied and no OTC was charged.

That arrangement was bread-and-butter for cross-border pension planning. Tens of thousands of UK expats across the EU moved their pensions this way between 2017 and 2024.

What Changed in the Autumn 2024 Budget

On 30 October 2024, Chancellor Rachel Reeves announced the removal of the EEA exemption with immediate effect. From that date onwards, the only remaining routes to escape the 25% charge are the narrower three exemptions: same-country residence, employer occupational scheme, or international organisation pension.

The change was framed as closing a “loophole” — but for ordinary UK expats living legitimately in Portugal, France, Spain or Ireland, it dramatically narrows the realistic pension planning options. In my experience advising clients in the Algarve, the change has caught a lot of people off guard. Several arrived in Portugal in 2023 or early 2024 with a half-formed plan to move their pension to Malta once they’d settled in. By the time they got around to actioning it, the rules had changed.

If you’re a Portugal resident in 2026, the practical reality is this: there is no Portuguese QROPS, so the same-country exemption is closed to you. Unless you have a very specific employer or international organisation pension, transferring to any overseas scheme will trigger the 25% charge.

How the 25% Charge Actually Works

The mechanics are worth understanding because they affect how you should plan. The OTC is applied at the point of transfer by the UK ceding scheme. Your provider works out the transfer value, deducts 25%, sends that to HMRC, and transfers the remaining 75% to the overseas scheme.

The reporting period for any subsequent change in circumstances is ten years from the date of transfer. If something happens during that window that would have made the original transfer chargeable — for example, you move from the same country as your QROPS to a country outside the EEA — HMRC can retrospectively apply the charge. Before 2017 the reporting window was five years; it was extended to ten in April 2017 to tighten the net.

For Portugal residents, the ten-year rule is mostly academic because nearly all transfers from October 2024 onwards already attract the charge upfront. But it’s a useful reminder that QROPS aren’t a “set and forget” structure — they have ongoing reporting obligations to HMRC for a decade.

The Alternative: Why a UK SIPP Now Wins for Most Portugal Expats

Given the new landscape, the strategy I now recommend to most UK expat clients in Portugal is straightforward: leave your pension in the UK, ideally consolidated into a flexible Self-Invested Personal Pension (SIPP).

The case for a UK SIPP after the 2024 changes:

• No 25% charge to enter. You keep your full pension pot working for you.
• Modern, low-cost SIPPs typically charge 0.15%–0.45% in platform fees, far less than the 1%–2% combined trustee and investment fees you’d see on many QROPS.
• Flexi-access drawdown — which simply means you draw flexible amounts when you want to — is available on UK SIPPs and gives Portugal-resident expats real control over how and when income is taken.
• UK-Portugal Double Taxation Agreement means pension income is generally taxed in Portugal (your country of residence) once you have an NT tax code from HMRC, avoiding double tax. We covered the mechanics in detail in our UK-Portugal Double Taxation Treaty guide.
• Currency flexibility. You can choose how much to convert to euros and when, rather than being locked into a euro-denominated QROPS structure.

There are still a small minority of cases where a QROPS makes sense — typically very large pension pots where the absent UK lifetime allowance restrictions of certain overseas schemes carry weight, or specific estate planning situations. But for the vast majority of expats with pots between £100,000 and £2 million, paying a 25% tax to gain access to a more expensive structure simply doesn’t add up.

When the OTC Still Doesn’t Apply in 2026

The three remaining exemptions are narrow but worth knowing:

Same-country residence: If you live in the same country as the QROPS. As noted, this doesn’t help Portugal residents because Portugal has no QROPS. It might be relevant if you later move to, say, Malta and want a Malta QROPS — though making major pension decisions to chase tax exemptions in a different country is rarely sensible.

Employer occupational scheme: If you’re employed by a company and the QROPS is your employer’s occupational pension scheme. This is unusual for retirees but can apply to working expats with international employers.

International organisation pension: If the QROPS is operated by a recognised international body (UN agencies, EU institutions, NATO, etc.) and you work for that body, or it’s a public service overseas pension scheme connected to your employment. Again, niche but real.

If none of these apply to you — and for most UK expats living in Portugal, none do — any QROPS transfer triggers the 25% charge.

What About Transfers Already Completed Before 30 October 2024?

If you transferred your pension to an EEA QROPS before 30 October 2024 and qualified for the EEA exemption at the time, the charge does not apply retrospectively to the original transfer. You’re not suddenly liable for 25% on something that was legal and exempt when you did it.

That said, you remain inside the ten-year reporting window. If your circumstances change in a way that would have triggered the OTC under the rules in force at the time of your transfer (for example, becoming resident outside the EEA within ten years of the transfer), HMRC can still apply the charge. Make sure your QROPS trustee has your current address and tax residency on file.

Frequently Asked Questions

If I move my UK pension to a Malta QROPS in 2026, will I pay the 25% charge?

Yes. From 30 October 2024 onwards, the EEA exemption no longer applies. Unless you are resident in Malta yourself, work for an international organisation, or the QROPS is your employer’s occupational scheme, the 25% Overseas Transfer Charge will be deducted from your transfer.

Does the OTC apply to taking my pension as income while living in Portugal?

No. The OTC applies only to transfers of pension assets to an overseas scheme. Drawing an income or taking lump sums from your UK pension while resident in Portugal is taxed under the UK-Portugal Double Taxation Agreement, not under the OTC rules. With an HMRC-issued NT tax code, your UK pension income is generally paid gross and taxed in Portugal.

Are there any QROPS based in Portugal?

No. Portugal has never appeared on HMRC’s list of Recognised Overseas Pension Schemes. This means Portugal residents cannot use the “same-country” exemption to avoid the OTC, and there is no straightforward way to hold a QROPS in your country of residence.

Can I reverse a QROPS transfer if I now regret it?

Generally no. Once a transfer to an overseas scheme has been made, unwinding it back to the UK is extremely difficult and may trigger further tax consequences. This is why pre-transfer advice is so important — the decision is effectively permanent.

Is keeping my pension in the UK risky if Brexit changes things further?

UK pensions are governed by UK law and protected by the Financial Services Compensation Scheme regardless of where you live. The UK-Portugal Double Taxation Agreement is a bilateral treaty that exists independently of EU membership and has remained stable through Brexit. Keeping a UK SIPP while resident in Portugal carries no special risk that wouldn’t already apply within the UK.

What to Do Next

The headline takeaway: for most UK expats living in Portugal in 2026, transferring your pension out of the UK no longer makes financial sense. A modern, low-cost SIPP combined with an NT tax code and the protection of the UK-Portugal Double Taxation Agreement gives you most of what a QROPS used to offer, without the 25% charge or the higher ongoing costs. The exceptions are real but narrow, and need careful case-by-case analysis.

If you’d like to discuss how the Overseas Transfer Charge and the post-October 2024 rules affect your personal situation, get in touch with our team. We specialise in helping UK expats in Portugal make the most of their pensions and investments, and we can review whether your current pension setup is still the right one for you.

Matthew Renier is a Chartered Financial Adviser at Arthur Browns Wealth Management, based in the Algarve, Portugal. He has over twenty years of experience helping British expats manage their pensions and financial planning across borders.

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