If you’ve moved your life from the UK to Portugal, sooner or later you’ll hit the same question I get asked almost every week: should I keep my UK pension in a SIPP, or move it into a QROPS? It sounds like a small piece of admin. It isn’t. The choice you make here can quietly cost or save you tens of thousands of pounds over a long retirement.

This guide cuts through the marketing noise and explains the SIPP vs QROPS decision in plain English, specifically for UK expats living in Portugal in 2026. We’ll cover how each one is taxed, what they cost, where the hidden traps sit, and how I actually help clients in the Algarve decide between them.

What Is a SIPP, and What Is a QROPS?

A SIPP (Self-Invested Personal Pension) is a UK-based pension wrapper. It stays on UK soil, regulated by the Financial Conduct Authority, and you continue to pay no UK tax on growth inside the pot. When you draw from it, the UK normally tries to tax those payments first, although a tax treaty arrangement with Portugal (more on this shortly) usually shifts taxing rights to Portugal where you’re resident.

A QROPS (Qualifying Recognised Overseas Pension Scheme) is, simply put, an overseas pension scheme that HMRC recognises as broadly equivalent to a UK pension. UK pension money can be transferred into it without losing tax-relieved status, provided certain rules are met. Common QROPS jurisdictions for European expats include Malta and Gibraltar.

The shorthand many advisers use is: a SIPP is your pension staying in the UK; a QROPS is your pension moving out of the UK. Both are legitimate options. Both have a place. Neither is automatically better.

The 2026 Tax Picture: SIPP vs QROPS for Portugal Residents

Tax is where this decision really lives or dies, so let’s get into it carefully.

SIPP and Portuguese tax. If you’re tax resident in Portugal and you draw from a UK SIPP, the UK-Portugal Double Taxation Treaty generally gives Portugal the right to tax those withdrawals. To stop the UK deducting income tax at source, you apply for an NT (No Tax) tax code via HMRC’s DT Individual form, which Portugal stamps and returns. Once that’s in place, your SIPP provider pays you gross and you declare the income in Portugal, where it’s typically taxed as pension income at marginal rates (or under whatever NHR-style regime applies to you).

QROPS and Portuguese tax. Once your pension is inside a QROPS and you’ve been non-UK resident for the required number of UK tax years (currently ten complete tax years for transfers made after 6 April 2017), withdrawals from the QROPS sit outside the UK tax net entirely. They’re taxed in Portugal under Portuguese rules. For many people this looks similar in net terms to a SIPP under the NT code, because Portugal ends up taxing the income either way.

So in pure income-tax terms for a long-term Portugal resident, the two routes often produce a similar outcome. Where they really diverge is in inheritance treatment, lump sums, currency, and cost.

Inheritance: The Quiet Game-Changer for 2027

This is the section I’d ask you to read twice.

From 6 April 2027, UK pensions are scheduled to be brought inside the scope of UK Inheritance Tax for the first time in a meaningful way. Most unused UK pension funds on death will be added to your estate for IHT purposes. For an expat with a large SIPP and a UK domicile-of-origin, that potentially exposes a significant slice of the pension to 40% UK IHT on death.

QROPS arrangements, particularly those properly established in Malta, are generally expected to fall outside this new UK IHT regime, because the assets are held in an overseas trust structure outside the UK. That’s a potentially huge difference for a client whose pension is, say, £1m or more and who has children or grandchildren they want to look after.

Now, important caveats. The 2027 rules are still being finalised. Domicile, not just residence, drives UK IHT. And HMRC is unlikely to be relaxed about transfers that look purely like IHT-avoidance shopping. But for genuinely settled Portugal residents with no intention of returning to the UK, the IHT angle has shifted from “interesting” to “central” in the SIPP vs QROPS conversation. In my experience working with clients in the Algarve, this single point now drives more transfer enquiries than anything else.

Lump Sums and the 25% Question

Under a UK SIPP, you can normally take 25% of your pension as a tax-free lump sum in the UK, up to the Lump Sum Allowance (£268,275 in 2026 unless you have protection). Portugal’s view of that lump sum is the part that catches people out: Portugal doesn’t necessarily recognise the UK’s tax-free status. For a Portuguese tax resident, a UK pension lump sum can be treated as taxable pension income in Portugal, depending on how it’s structured and which regime you fall under.

QROPS typically allow up to 30% as a pension commencement lump sum, but again, what Portugal does with it on the way in is what matters. Both routes need careful timing and planning around residency and any NHR or IFICI-style regime you sit under.

The simple rule of thumb: never assume the UK’s tax treatment travels with you. The country where you’re resident at the moment of payment is usually the one whose rules count.

Costs: Where the Two Really Differ

A modern, low-cost UK SIPP with an online platform might cost you anywhere from 0.15% to 0.45% per year in platform fees, plus fund charges, plus adviser fees if you use an adviser. For a £500,000 pot, total ongoing costs can comfortably sit under 1% all-in if it’s well-built.

QROPS are typically more expensive. You’re paying for an overseas trustee, an investment platform, sometimes an investment manager, and usually an adviser. All-in costs of 1.5% to 2.5% a year are not unusual, especially on smaller pots. There are often setup fees too, sometimes several thousand pounds.

Over a 25-year retirement, the difference between 0.9% and 1.9% a year compounds into a number that is genuinely uncomfortable to look at. As a very rough illustration, on a £500,000 pot growing at 5% a year and drawing nothing, the extra 1% a year would cost you in the region of £150,000–£200,000 over 25 years. That’s the price of an IHT insurance policy, if you like. Sometimes worth paying. Sometimes not.

Currency: Pounds, Euros and a 25-Year Time Horizon

You live in euros. Your bills, your shopping, your healthcare, your house — all priced in euros. Your UK pension is almost certainly invested heavily in sterling assets and pays out in pounds.

A SIPP doesn’t stop you from investing globally — you can hold US, European and emerging-market funds inside it. But the wrapper itself is sterling, and many UK clients end up sterling-heavy by accident rather than design. A QROPS based in Malta or Gibraltar can be denominated in euros from the outset, which removes the conversion friction at withdrawal stage.

That said, currency exposure is a question of investment design, not pension wrapper. A well-built SIPP can be hedged or globally diversified just as effectively as a QROPS. Don’t let a salesperson convince you that a QROPS is the only way to manage currency — it isn’t.

The Ten-Year Trap, and Other Rules to Know

If you transfer a UK pension to a QROPS, and you then become UK resident again within five UK tax years (for transfers since 9 March 2017) or take benefits before being non-UK resident for ten complete UK tax years, HMRC can claw back tax and apply the Overseas Transfer Charge of 25%. For a £500,000 transfer, that’s potentially £125,000 of tax simply for changing your mind.

For clients who are absolutely settled in Portugal long-term, this is manageable. For anyone who isn’t sure they’ll stay, or whose career or family might pull them back to the UK, this is a serious risk and a strong argument for keeping the pension as a SIPP.

Who SIPP Suits Best (in My Experience)

I tend to recommend keeping a UK SIPP for clients who fit roughly this profile: pots under around £500,000, where the cost difference matters more; people who aren’t entirely certain they’ll stay in Portugal forever; clients who want maximum flexibility and the broadest investment choice at the lowest cost; and those whose IHT exposure is modest, either because the pot is smaller or because their domicile position means UK IHT is not a major worry for them.

Who QROPS Suits Best

QROPS often makes more sense for: clients with large pensions (typically £500,000+ and often well over £1m) where the 2027 UK IHT changes would otherwise hit hard; people who are absolutely settled in Portugal long-term with no intention of returning to the UK; expats who want their pension structured in euros to match their spending; and complex cases where a UK pension’s death benefit rules don’t fit family circumstances well.

It’s almost never the right answer for a £100,000 pot. The fixed costs swamp the benefits.

How a Good Adviser Should Approach This Decision

If you ask three things of any adviser presenting you with a QROPS recommendation, ask these:

1. Show me the all-in annual cost comparison over 20 years. Not just year one. Get the numbers in writing.
2. Show me the tax outcome under both routes, including the lump sum and ongoing income, in Portugal specifically. Generic continental-Europe answers aren’t good enough.
3. Show me what happens if I die at 70, 80 and 90 under each route, including the 2027 UK IHT changes.

If those numbers aren’t presented clearly, walk away. There’s still a long history in this industry of QROPS being pushed onto clients for whom they’re a poor fit, simply because the commissions are larger. The Financial Conduct Authority has been clear that pension transfer advice must start from a presumption that the existing scheme is best, and the burden of proof lies with the adviser recommending the move. That’s the right standard.

Frequently Asked Questions

Can I transfer a Defined Benefit pension into a QROPS?

Technically yes, but you need regulated UK transfer advice if the transfer value is over £30,000, and most advisers will start from the assumption that a DB transfer is not in your best interests. The guaranteed, inflation-linked income from a DB scheme is genuinely valuable and very hard to replicate. Tread carefully here, and never let anyone pressure you.

Will the UK 2027 IHT changes definitely apply to my pension?

The headline rule is that most unused UK pension funds will fall inside your estate for UK IHT from April 2027. Whether you specifically owe UK IHT depends on your domicile, your total estate, and any reliefs that apply. Long-term Portugal residents may have arguments around losing UK deemed-domicile status over time, but this is technical ground and worth taking advice on well before 2027 arrives.

Is a SIPP still safe to hold from Portugal?

Yes. There is nothing illegal or problematic about a Portugal resident holding a UK SIPP. Your provider may have practical restrictions (some won’t take new business from non-UK residents), but existing SIPPs continue to operate normally and remain regulated by the FCA. See HMRC’s guidance on UK pensions for non-residents (gov.uk) for the official position.

What about the Lifetime Allowance — does it still matter?

The Lifetime Allowance was abolished in April 2024 and replaced with the Lump Sum Allowance (£268,275) and Lump Sum and Death Benefit Allowance (£1,073,100). For very large pots, the new allowances still cap the tax-free element of withdrawals and certain death benefits, so they remain relevant in 2026.

Can I have both a SIPP and a QROPS?

Yes, and for some clients with very large overall pension wealth this can be the right answer. You might keep one pot in a low-cost SIPP for flexibility and lower costs, and transfer another to a QROPS for IHT planning. It’s not all-or-nothing.

What to Do Next

The honest summary: for most UK expats in Portugal with modest pension wealth, a well-built SIPP under an NT tax code is still the cheapest and most flexible solution in 2026. For those with larger pots, particularly with the 2027 UK IHT changes looming, a properly structured QROPS is now back on the table in a way it hasn’t been for years.

If you’d like to discuss how this applies to your personal situation — your pot size, your family setup, your plans for the next ten years — get in touch with our team. We specialise in helping UK expats in Portugal make the most of their pensions and investments, and we’ll always start with the question of whether you need to move anything at all.

Matthew Renier is a Chartered Financial Adviser at Arthur Browns Wealth Management, based in the Algarve, Portugal. He works with British expats across Portugal on pension planning, tax-efficient investing and long-term retirement strategy.

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