top of page

UK Pension Transferred to a SIPP? A New Court Ruling Protects Treaty Tax Benefits for Expats

  • Renascence Capital
  • 2 days ago
  • 2 min read

A recent decision from a UK tax tribunal has handed international retirees some genuinely good news: moving a UK pension into a Self-Invested Personal Pension (SIPP) does not automatically strip away your tax-treaty protections — even if you later withdraw the money while living overseas.


For anyone retiring abroad or planning a cross-border move, this ruling helps settle a long-running grey area around the taxation of UK pension transfers.


ree

The Situation in Plain English


A former UK employee spent decades building up benefits in a company pension. When he retired, he shifted those benefits into a SIPP — something thousands of expats do for better control and investment flexibility.


Later, he moved to Portugal and began withdrawing from the SIPP under Portugal’s favourable tax rules.

HMRC decided to treat those withdrawals as fully taxable in the UK and withheld over £1.5 million at source. Their argument was simple:


Once a pension is transferred into a SIPP, it supposedly stops counting as a pension “earned from past employment,” meaning treaty protections no longer apply.


The taxpayer disagreed — and took HMRC to court.

What the Tribunal Said


The tribunal pushed back hard against HMRC’s interpretation.

It ruled that:


  • The money inside the SIPP still came entirely from the man’s original employment.

  • The fact that the structure changed — from a defined-benefit scheme to a SIPP — didn’t break that link.

  • Because the funds were still tied to past employment, the double-tax treaty with Portugal applied.


And under that treaty, Portugal — not the UK — gets first rights to tax those pension payments.

HMRC is now required to refund the tax it withheld.

Why This Matters for Expats


If you live abroad or plan to retire overseas, this decision strengthens the argument that:


  • Transferring to a SIPP doesn’t automatically destroy treaty protection.

  • Withdrawals can still fall under the tax rules of your country of residence.

  • UK withholding tax may not apply if the treaty is clear and the pension history is properly documented.


It also reinforces something we tell clients constantly:The structure of the pension is less important than the origin of the funds.


If the money was earned from employment in the UK, most treaties treat it that way regardless of how it’s later packaged.

But Don’t Treat This as a Blanket Rule


Every expat’s situation is different.


Your outcome can change depending on:


  • Which country you live in

  • Whether new contributions were made to the SIPP

  • Whether the pension was originally defined-benefit or defined-contribution

  • How your residency status is documented


This ruling is a strong precedent, but it’s not a universal shield. The safest approach is always personalised planning.

The Takeaway


For expats drawing UK pension benefits abroad — or thinking about transferring into a SIPP — this case is a reassuring signal. Properly structured, your pension may retain its treaty benefits, even after a transfer.


It’s a reminder that cross-border tax planning is full of traps, but also full of opportunities for those who navigate it with the right expertise.

 
 
bottom of page