Transferring a defined-benefit pension abroad, when and why

A defined benefit pension, sometimes called a final salary pension, promises a specific income for life. The amount is set by a formula: typically your years of service, an accrual rate, and either a final or career-average salary. The scheme, not you, bears the investment risk. If markets fall, the income you were promised does not.

That promise has real monetary value. The cost of replicating a guaranteed, inflation-adjusted income from a pot of invested capital is the transfer value. For most members it is a very large number. It is also the amount you give the guarantee up for.

The FCA requires regulated advisors to start from the position that a defined benefit transfer is unsuitable, unless it can be demonstrated, on the specific facts, that the transfer is in the client’s interest. This is not a bureaucratic default. It reflects the asymmetry of the decision: once the guaranteed income is gone, it cannot be recovered.

For an expat the appeal is understandable. A large pot in a SIPP or QROPS is visible, accessible, and portable. A deferred pension in a former employer’s scheme feels remote and hard to manage from Thailand. But visibility is not value, and access is not income security.

There are circumstances where a transfer is genuinely worth analysing. If the scheme is in deficit and the employer covenant is weak, the security of the promised income is not what it appears. If you have a serious health condition that significantly reduces life expectancy, a guaranteed income for life is worth less than a sum you can pass on. If you already have substantial guaranteed income elsewhere, the marginal value of another guaranteed stream is lower.

None of these means a transfer is right. They mean the question deserves proper analysis rather than a default rejection. That analysis is regulated work. It must be carried out by an FCA-authorised advisor holding the Pension Transfer Specialist qualification, and the recommendation must be in writing.

The standard approach evaluates the rate of return the transferred fund would need to achieve, net of charges and over the assumed drawdown period, to match the projected scheme income. If that required return is high relative to what a diversified portfolio can realistically earn, the transfer is hard to justify. If it is low, the case is stronger.

That figure does not decide the question alone. It sits alongside the scheme’s funding position, the member’s health, other income, estate objectives, and risk tolerance. But it anchors the conversation in something verifiable rather than something aspirational.

For an expat, two further layers apply. First, the destination tax treatment. A defined benefit pension drawn in the UK and remitted to Thailand by a Thai tax resident falls under the UK-Thailand double tax agreement; a fund drawn from a SIPP or QROPS has a different treaty treatment. The after-tax income profile can differ meaningfully and should be modelled, not assumed.

Second, currency. A deferred defined benefit pension pays in sterling for life. A retiree living in Thailand and spending in baht has currency exposure from that sterling income, but also the security of a guaranteed sterling sum. A transferred fund invested in global markets has a different risk and currency profile. Neither is obviously better; both are worth understanding before a decision is made.

If you are resident outside the UK and want advice on a defined benefit transfer, the advice must come from an FCA-regulated advisor. The FCA’s jurisdiction does not stop at the UK border when the pension is a UK-regulated scheme. An advisor operating from Thailand who is not FCA-authorised cannot lawfully advise on a defined benefit transfer, and that advice is not covered by the Financial Services Compensation Scheme if something goes wrong.

This is not a technicality. The compensation scheme is the safety net if a firm fails or is found to have advised negligently. Advice given outside the regulatory perimeter carries no such protection.

This article describes the framework for defined benefit transfer decisions. It is general information and not advice about your own pension.

Defined benefit analysis is regulated and specific to each member. The UK pension transfer service at /en/services/uk-pension-transfer describes the structured review, and the checklist at /en/guides/uk-pension-transfer-checklist outlines the documentation. For a 30-minute conversation about your pension position, book at /en/book.