Transferring a UK Pension to the US: Why QROPS Rarely Works

You cannot, in practice, transfer a UK pension to the US. No American 401(k) or IRA is on HMRC's list of recognised overseas pension schemes, so the transfer is an unauthorised payment taxed at 40% or more, and the IRS does not treat it as a rollover. Most people leave the pension in the UK and draw it under the treaty. This guide sets out why the door is closed and what to do instead.

It sits alongside our guide to how UK pensions are taxed on a US return and our first-year tax guide for Brits moving to the US.

Can you transfer a UK pension to a US 401(k) or IRA?

No, not without tax charges that make it pointless. A UK registered pension scheme can only make a tax-free transfer abroad to a qualifying recognised overseas pension scheme, or QROPS. GOV.UK's guidance on transferring to an overseas pension scheme says that if the receiving scheme is not a QROPS, you pay at least 40% tax on the transfer.

A 401(k) is the American employer-sponsored retirement plan, the rough equivalent of a UK workplace defined contribution pension. An IRA (individual retirement arrangement) is the personal version, closer to a UK personal pension or SIPP. Neither is a QROPS.

What is a QROPS, and why are no US schemes on HMRC's list?

The label is built in layers. HMRC's Pensions Tax Manual explains that a scheme must first be an overseas pension scheme: established outside the UK, regulated where it is based and recognised for tax there. It must then be a recognised overseas pension scheme (ROPS), which adds further tests. To be a qualifying ROPS, the scheme manager must also notify HMRC, undertake to report to it and operate the overseas transfer charge. The rules are in sections 150 and 169 of the Finance Act 2004 and SI 2006/206.

HMRC publishes the schemes that have notified it in the ROPS notification list, updated on the 1st and 15th of each month. We checked the list dated 1 October 2026. It has sections for Australia, Canada, Gibraltar, Guernsey, Ireland, the Isle of Man, Jersey, Malta, New Zealand, Switzerland and others. It has no section for the United States.

The list is also not an approval. It records schemes that have told HMRC they meet the conditions; HMRC says it cannot confirm that any of them is a ROPS, or that a transfer to one will be free of UK tax, and that checking is your responsibility.

The pension age test

HMRC's guidance does not single out American plans, but the general tests explain their absence. The clearest is the pension age test in PTM112300, which has applied since 6 April 2015 under regulation 3(6A) of SI 2006/206. Benefits from UK-relieved funds must not be payable earlier than the UK normal minimum pension age, currently 55 and rising to 57 from 6 April 2028, except on ill-health retirement or where the payment would have been authorised from a UK scheme.

US law points the other way. The IRS states in its IRA distribution FAQs that you can take money out of an IRA at any time, with no need to show hardship; withdrawals before age 59½ are simply taxable and may carry a 10% additional tax. A penalty is not a prohibition, so a plan that allows access at any age cannot meet the pension age test. A 401(k) has the same problem to the extent its rules allow payments before 55.

What does it cost to transfer a UK pension to a scheme that is not a QROPS?

A transfer to a non-QROPS is an unauthorised member payment, and three separate UK charges can follow.

• Unauthorised payments charge: 40% of the amount, payable by the member under section 208 of the Finance Act 2004 (PTM134100).
• Unauthorised payments surcharge: a further 15% under section 209, where unauthorised payments within 12 months add up to 25% or more of the member's rights under the scheme. A full transfer always crosses that line, so the member's bill is 55%.
• Scheme sanction charge: 40%, payable by the scheme administrator under sections 239 to 241, reducing to as little as 15% where the member has paid the unauthorised payments charge (PTM135100).

The third charge is why a reputable UK scheme will decline the request rather than process it.

Illustrative example: a software engineer has a £400,000 UK personal pension and moves to Texas. If her UK scheme were to pay the whole fund into a US IRA, she would owe HMRC a £160,000 unauthorised payments charge and a £60,000 surcharge, £220,000 in all, and the scheme would face its own sanction charge. If she instead sent the fund to a QROPS in a third country while living in the US, the overseas transfer charge would take 25%, or £100,000, before the money arrived. If she leaves the fund in a UK scheme, no UK transfer charge arises. This is illustrative only; the right course depends on the individual's full circumstances.

The third-country QROPS route and the 25% overseas transfer charge

The workaround long marketed to people heading for America was a QROPS in a third country, typically in the EU. That route largely closed in 2024.

The overseas transfer charge is 25% of the transferred value. HMRC's manual at PTM102200 lists the exclusions: the member lives in the same country as the QROPS, or the QROPS is the member's employer's occupational scheme, an overseas public service scheme or an international organisation's scheme. A further exclusion, for a QROPS in the EEA or Gibraltar, now applies only to transfers requested before 30 October 2024 and completed before 30 April 2025.

A US resident using a personal scheme in Malta or another third country fits none of the surviving exclusions, so the charge is 25% of the whole transferred value.

Even where an exclusion applies, there is a cap: the overseas transfer allowance, which equals the member's lump sum and death benefit allowance, is usually £1,073,100 according to GOV.UK's current guidance (checked 1 October 2026, tax year 2026/27), and transfers above it are charged at 25% on the excess.

There is a US problem too. Article 18(1) of the US/UK treaty stops the US taxing growth inside a pension scheme established in the UK. A scheme established in a third country is outside that article, so the US treatment of both the transfer and the new scheme has to be analysed from scratch.

The US side: why the IRS does not treat it as a rollover

A rollover is the US mechanism for moving retirement money between plans without tax. The IRS rollover chart lists what can roll into what: IRAs, SEP and SIMPLE IRAs, qualified plans such as 401(k)s, 403(b) plans and governmental 457(b) plans. Foreign pension schemes are not on it.

Some argue that the treaty fills the gap, because Article 18(1) defers tax on scheme income until it is paid to the member "(and not transferred to another pension scheme)". The IRS Office of Chief Counsel addressed that argument in memorandum AM2008-009, "UK Pension Rollovers". Its conclusion: nothing in Article 18(1) overrides the requirement that a distribution be an eligible rollover distribution under section 402(c)(4) of the Internal Revenue Code. A transfer between two schemes in the same country only has to satisfy that country's rules; a transfer from a UK scheme to a US plan has to satisfy both, and it fails the US ones. The memorandum says the transferred growth and pre-tax contributions may be treated as a taxable distribution in the US.

The memorandum is internal advice and says it may not be cited as precedent, but it is the clearest published statement of the IRS view, and we are not aware of later IRS guidance that reverses it. Nor can the money go in as a contribution: IRS Publication 590-A caps IRA contributions at $7,500 for 2026 ($8,600 from age 50) and requires them to be in cash unless they are rollovers.

The memorandum also matters for anyone thinking of cashing out. Article 17(2) says a pension lump sum is taxable only in the country where the scheme is established, but the saving clause in Article 1(4) lets the US tax its own residents regardless. We explain that mechanism in our guide to the saving clause.

What are the realistic alternatives to a transfer?

Option	UK tax result	US tax result	When it fits
Transfer to a US 401(k) or IRA	Unauthorised payment: 40% charge plus 15% surcharge on the member; scheme sanction charge on the scheme	Not an eligible rollover; may be taxed as a distribution	Effectively never
Transfer to a QROPS in a third country	25% overseas transfer charge for a US resident (EEA and Gibraltar exclusion ended for requests from 30 October 2024)	Outside Article 18 of the US/UK treaty; needs separate analysis	Rarely, and usually only if you will live in the QROPS country
Leave the pension in its UK scheme and draw it later	No transfer charge; regular payments exempt from UK tax on a treaty claim	Growth deferred under Article 18(1); payments taxed as income when received	The default for most people
Consolidate into a UK SIPP that accepts US residents	Recognised transfer between UK schemes: no UK charge	Not treated as a distribution, per AM2008-009	Several small pots, or a provider that will not deal with a US address
Cash the pension in as a lump sum	Taxed under PAYE beyond any tax-free amount; Article 17(2) gives the UK the taxing right	The US also taxes its residents under the saving clause, with credit for UK tax	Small pots, after modelling both sides

Leaving the pension in the UK and drawing it under Article 17

While the money stays in a UK scheme, Article 18(1) keeps the growth out of US tax, and because that article is an exception to the saving clause, the protection holds for US citizens and green card holders too. When you start drawing, Article 17(1)(a) makes regular pension payments taxable only in your country of residence, which is the United States. UK government service pensions follow Article 19 instead.

A UK pension payer deducts tax under PAYE until HMRC tells it otherwise. The claim is made on Form US-Individual 2002. HMRC's notes to the form say it must be certified by the IRS: you send it, with IRS Form 8802 (the application for a US residency certificate) and the user fee, to the IRS in Philadelphia. Where HMRC grants relief at source, the payer is told to stop deducting tax, in PAYE terms an NT code, which GOV.UK defines as paying no tax on that income. Tax already deducted can be reclaimed on the same form.

Lump sums are the exception. The UK keeps its taxing right under Article 17(2), and the US taxes its residents on the same payment under the saving clause. That includes the UK's 25% tax-free lump sum, which is tax-free in the UK only. Our guide to drawing a US and a UK pension at the same time covers who taxes each payment.

Consolidating into a UK SIPP

Some UK providers will not deal with a member who has a US address. Moving the money to a UK self-invested personal pension (SIPP) whose provider accepts US-resident clients solves that without leaving the UK system. A transfer between UK registered schemes carries no UK charge, and AM2008-009 confirms that, for a US resident, a UK-to-UK transfer made under UK law should not be treated by the US as a distribution.

Two cautions. For a defined benefit (final salary) pension, the FCA's stated view is that most people are better off keeping it, and regulated advice may be required by law before a transfer. And the SIPP still has to be reported; our guide to SIPP US tax reporting covers the forms. If you built the pension up as an American working in Britain, see also UK workplace pensions for US citizens.

Currency and US reporting

A pension left in the UK pays in sterling, so your dollar income moves with the exchange rate. The pension may also be reportable. The IRS comparison of Form 8938 and the FBAR gives the tests: an FBAR where foreign financial accounts exceed $10,000 in aggregate at any time in the calendar year, and Form 8938 for an unmarried taxpayer living in the US above $50,000 on the last day of the tax year or $75,000 at any time ($100,000 and $150,000 for a joint return). Our comparison of Form 8938 and FBAR thresholds has the full table.

Pension liberation and transfer scams: what the regulators say

HMRC's guidance on pension schemes and unauthorised payments warns about firms that entice savers to unlock their pensions early with loans or cash incentives, and is blunt that there is no loophole: these are unauthorised payments.

The FCA's pension scams page (updated January 2026) lists the warning signs: promises of better returns, high-pressure sales tactics, unusual and unregulated investments, complicated structures where it is unclear where the money ends up, and several parties, some overseas, each taking a fee. Before changing anything, check the adviser on the FCA Financial Services Register and the FCA Warning List.

What people get wrong when they try to transfer a UK pension to the US

• Assuming a QROPS exists in every country. The list is by notification, and the United States is not on it.
• Relying on pre-2024 articles about EU QROPS. The EEA and Gibraltar exclusion from the 25% charge has gone for new requests.
• Reading "not transferred to another pension scheme" in Article 18(1) as permission for a tax-free move into an IRA. The IRS has said it is not.
• Leaving the UK payer on an emergency or basic rate code for years instead of filing Form US-Individual 2002.
• Taking the 25% tax-free lump sum after becoming US resident and assuming it is tax-free in America as well.

The bottom line

The UK rules tax the member on a transfer to a US plan at up to 55%, the third-country QROPS route now costs 25%, and the IRS would not treat the receipt as a rollover anyway. A UK pension left in a UK scheme stays sheltered from US tax while it grows, and once the treaty claim is in place its regular payments are taxed once, in the US.

US/UK Cross Border Tax — US CPAs and UK tax advisers working as one team; London, Manchester, New York, San Francisco. If you want help deciding whether to transfer a UK pension to the US, consolidate it or leave it where it is, we model both sides before anything moves. We also work with Brits living in the US and handle the treaty relief claims that stop UK tax at source. To talk it through, get in touch.