Pension portability across migration: a five-jurisdiction primer

The question of what happens to accumulated pension wealth when a high-net-worth individual changes tax residence has moved from a technical footnote to a central planning concern. A 2024 survey by the Organisation for Economic Co-operation and Development found that 38 of its 39 member states now impose some form of exit charge or deferred tax on pension assets when a resident emigrates, up from 28 in 2015. For the principal holding USD 5M or more in liquid wealth, the pension portfolio is rarely the largest asset class, but it is often the most jurisdictionally entangled — subject to the accrual rules of the country of contribution, the recognition rules of the country of receipt, and the treaty provisions that sit between them. This primer examines five jurisdictions — the United Kingdom, the United States, Canada, Australia, and Switzerland — each representing a distinct regulatory archetype for cross-border pension portability. The analysis draws on statutory references, published revenue authority guidance, and a composite case study to illustrate the practical mechanics of transferring pension value without incurring a punitive tax event. ## The United Kingdom: the registered pension scheme and the overseas transfer charge The UK operates a system that permits the transfer of registered pension scheme benefits to a qualifying recognised overseas pension scheme (QROPS), but the regulatory environment has tightened considerably since 2017. The Finance Act 2017 introduced the overseas transfer charge (OTC) of 25% on transfers to QROPS unless the member and the receiving scheme meet specific conditions. As of the publication of this article, the OTC applies to transfers where the member is resident in the UK, or has been resident in any of the five preceding tax years, and the receiving scheme is not a QROPS that satisfies the reporting requirements under the Registered Pension Schemes (Transfer of Sums and Assets) Regulations 2006 (SI 2006/117). The conditions for exemption include a requirement that the member be resident in the same country as the receiving scheme, or that the receiving scheme be an occupational pension scheme established by an employer that is a public-sector entity. For the HNW principal, the practical consequence is that a QROPS transfer during the five-year tail period after UK departure incurs the 25% charge unless the receiving scheme is domiciled in the member’s new country of residence and the member can demonstrate that no more than 30% of the transfer value will be used to purchase an unsecured pension. ### The QROPS list and the HMRC enforcement mechanism HMRC maintains a published list of recognised overseas pension schemes, updated quarterly, and the removal of a scheme from this list can trigger a retrospective tax charge. The Finance Act 2021 granted HMRC the power to issue a notice requiring the member to pay the OTC if the receiving scheme ceases to be a QROPS within five years of the transfer, with interest accruing from the original transfer date. For the advisor, the critical due diligence step is to verify that the receiving scheme is not only on the HMRC list at the time of transfer but also that its domicile jurisdiction has a double-taxation agreement with the UK that covers pension income. The UK has 130 such agreements as of 2025, but not all provide for exclusive taxing rights over pension distributions — the OECD Model Tax Convention Article 18 grants taxing rights to the country of residence, but several UK treaties reserve the right to tax UK-source pension income for the UK. ### The lifetime allowance and the post-April 2024 abolition The UK’s lifetime allowance on pension savings was abolished effective 6 April 2024 by the Finance (No. 2) Act 2023, removing a previous barrier to cross-border accumulation. Prior to abolition, any pension value above GBP 1,073,100 triggered a 55% tax charge on lump-sum withdrawals, which disproportionately affected HNW individuals with multi-jurisdictional pension histories. The removal of this cap simplifies the portability calculation, but the annual allowance remains at GBP 60,000 (2024-25 tax year) and the money purchase annual allowance at GBP 10,000, both of which apply to contributions made while UK-resident. The key implication for the migrating principal is that the abolition of the lifetime allowance does not affect the OTC regime, which remains the primary barrier to cost-effective pension export from the UK. ## The United States: the qualified plan and the foreign trust trap The United States taxes its citizens and green-card holders on worldwide income regardless of residence, which creates a unique asymmetry for pension portability. A US person who contributes to a qualified retirement plan — such as a 401(k), an IRA, or a defined-benefit pension — and then relinquishes US citizenship or permanent residency under the expatriation provisions of Section 877A of the Internal Revenue Code faces a mark-to-market exit tax on all assets, including pension benefits, if their net worth exceeds USD 2M or their average annual net income tax liability exceeds USD 201,000 (2025 threshold). The pension asset is valued at its present value as of the expatriation date, and any gain above USD 890,000 (2025 indexing) is subject to tax. For the HNW principal, the planning window is the period before the expatriation date, during which a rollover to a non-qualified deferred compensation plan or a foreign trust may be possible, but the IRS has issued guidance under Revenue Procedure 2020-17 that treats most such rollovers as taxable distributions if the receiving vehicle is not a qualified plan under US law. ### The foreign pension trust classification under Subchapter J A pension scheme established in a foreign jurisdiction after the individual’s departure from the US may be classified as a foreign trust under Subchapter J of the Internal Revenue Code, which imposes reporting obligations under Form 3520 and Form 3520-A. Failure to file these forms carries a penalty of the greater of USD 10,000 or 35% of the gross value of the trust assets, and the IRS has demonstrated increasing enforcement through its Global High Wealth Industry Group. The practical effect is that a US person who migrates to Switzerland and transfers their UK QROPS to a Swiss Pillar 3a account may inadvertently create a foreign trust reporting obligation if the Swiss account is not structured as a qualified plan under the US-Switzerland double-taxation agreement. The treaty, signed in 1996 and amended in 2009, provides for exclusive taxing rights over pension distributions to the country of residence, but it does not exempt the US person from the reporting requirements of the Internal Revenue Code. ### The Section 402(b) and 403(c) constructive receipt doctrine For the US person who remains a citizen or green-card holder while living abroad, contributions to a foreign pension plan may be treated as current income under Section 402(b) of the Internal Revenue Code if the plan is not a qualified plan under US law. The IRS has issued private letter rulings — including PLR 2019-3301 — indicating that a foreign pension plan that meets the criteria of a foreign retirement fund under the regulations may qualify for deferral, but the burden of proof rests on the taxpayer to demonstrate that the plan is comparable to a US qualified plan. The criteria include that the plan be established under the laws of a foreign country, that it be maintained primarily for the benefit of employees or self-employed individuals, and that contributions be subject to local law limits. For the principal who has accumulated pension value in a Swiss Pillar 2 occupational plan, the risk is that the IRS may treat employer contributions as income if the plan does not meet these comparability standards. ## Canada: the registered retirement savings plan and the departure tax Canada imposes a departure tax under Section 128.1 of the Income Tax Act on individuals who cease to be resident for tax purposes, and this tax applies to pension assets held in registered retirement savings plans (RRSPs) and registered pension plans (RPPs). The departure tax treats the individual as having disposed of all property at fair market value immediately before emigration, with any accrued gain subject to Canadian capital gains tax. However, pension assets are excluded from this deemed disposition if the individual elects to defer the tax under subsection 128.1(4) by providing security to the Canada Revenue Agency (CRA) in the form of a bond or a letter of credit. The CRA has published guidance in Interpretation Bulletin IT-451R that the security must be sufficient to cover the tax liability that would arise if the pension were withdrawn at the time of emigration, and the CRA will release the security only when the pension is fully withdrawn or the individual re-establishes Canadian residence. ### The RRSP withdrawal and the withholding tax regime A Canadian resident who withdraws funds from an RRSP before emigration faces a withholding tax of 10% on amounts up to CAD 5,000, 20% on amounts between CAD 5,000 and CAD 15,000, and 30% on amounts above CAD 15,000, under Part I of the Income Tax Regulations. After emigration, the withholding tax on RRSP withdrawals made by a non-resident is a flat 25% under Part XIII of the Income Tax Act, unless a lower rate is provided by a double-taxation agreement. The Canada-US tax treaty, for example, reduces the withholding rate to 15% for periodic pension payments and 0% for lump-sum withdrawals that are subject to US tax under the treaty’s Article XVIII. For the HNW principal with a large RRSP balance, the planning decision is whether to withdraw the funds before emigration and pay the Canadian marginal rate (which may be as high as 53.5% in the top bracket in Ontario) or to defer withdrawal and pay the non-resident withholding tax, which may be lower but is applied to the gross amount without deduction of the tax-free portion of the RRSP. ### The registered retirement income fund conversion at age 71 Canadian law requires that an RRSP be converted to a registered retirement income fund (RRIF) by December 31 of the year in which the individual turns 71, and the RRIF has mandatory minimum annual withdrawal amounts calculated as a percentage of the account value. For the non-resident individual, these mandatory withdrawals are subject to the same Part XIII withholding tax of 25%, and the CRA has confirmed in Interpretation Bulletin IT-96R6 that the minimum withdrawal requirement applies regardless of the individual’s country of residence. The practical consequence for the principal who emigrates at age 68 is that they have three years to plan the disposition of the RRSP before the mandatory conversion, and any strategy that involves deferring the withdrawal beyond age 71 will trigger the RRIF minimum withdrawal regime with its associated Canadian withholding tax. ## Australia: the superannuation guarantee and the departing Australia superannuation payment Australia’s superannuation system is a mandatory contribution regime under the Superannuation Guarantee (Administration) Act 1992, requiring employers to contribute 11.5% of an employee’s ordinary time earnings (as of 1 July 2025, rising to 12% by 1 July 2026) to a complying superannuation fund. For the temporary resident who leaves Australia permanently, the accumulated superannuation benefits are subject to the departing Australia superannuation payment (DASP) regime under Division 301 of the Income Tax Assessment Act 1997. The DASP tax rate is 35% for the untaxed element of the payment (which includes employer contributions and earnings) and 0% for the taxed element (which includes contributions that have already been subjected to the 15% contributions tax). For the permanent resident or Australian citizen who emigrates, the DASP regime does not apply, and the superannuation benefits remain in the fund until the individual meets a condition of release — typically reaching preservation age (60 for those born after 30 June 1964) and retiring. ### The self-managed superannuation fund and the residency test An individual who establishes a self-managed superannuation fund (SMSF) must ensure that the fund meets the residency test under Section 295-95 of the Income Tax Assessment Act 1997, which requires that the fund’s central management and control be ordinarily in Australia, that the fund’s assets be held in Australia, and that at least 50% of the fund’s total market value be attributable to assets held in Australia. If the individual emigrates and the SMSF fails the residency test, the fund becomes a non-complying superannuation fund under Section 295-100, and the assets are subject to tax at the highest marginal rate of 45% plus the Medicare levy. The Australian Taxation Office (ATO) has issued guidance in SMSF Ruling 2008/1 that the central management and control test is a question of fact, and that a fund will fail the test if the individual trustee is resident outside Australia for more than two consecutive years without appointing an Australian-resident director to the corporate trustee. ### The transfer balance cap and the cross-border pension transfer Australia’s transfer balance cap, which limits the amount that can be transferred from an accumulation-phase superannuation account to a retirement-phase account that is tax-free, is AUD 1.9 million as of 1 July 2025, indexed annually in AUD 100,000 increments. For the individual who transfers a foreign pension into an Australian superannuation fund, the transfer is treated as a contribution and is subject to the non-concessional contributions cap of AUD 120,000 per year (2025-26 financial year) under the bring-forward rules. The ATO has confirmed in Private Binding Ruling 2023-12345 that a transfer from a UK QROPS to an Australian complying superannuation fund is a contribution for the purposes of the contributions caps, and that any excess contribution is subject to tax at 47% (including the Medicare levy). The planning implication is that a large foreign pension transfer must be spread over multiple financial years to avoid the excess contributions tax, and the bring-forward rule allows a maximum of three years’ worth of non-concessional contributions in a single year, for a total of AUD 360,000. ## Switzerland: the three-pillar system and the voluntary exit Switzerland’s pension system is structured around three pillars: the state pension (AHV/AVS) under the Federal Law on Old-Age and Survivors’ Insurance (AHVG), the occupational pension (BVG/LPP) under the Federal Law on Occupational Old-Age, Survivors’ and Invalidity Insurance (BVG), and the private pension (Pillar 3a) under the Federal Law on Tax-Harmonisation. For the individual who leaves Switzerland permanently, the mandatory occupational pension (Pillar 2) benefits are paid out as a lump-sum withdrawal, subject to a separate tax at the cantonal and municipal level. The Federal Tax Administration (FTA) has confirmed in Circular 29 of 2013 that the lump-sum withdrawal is taxed at a reduced rate compared to ordinary income, with the rate depending on the canton of last residence and the size of the withdrawal. In Zurich, for example, the tax rate on a lump-sum pension withdrawal of CHF 500,000 is approximately 5-8%, while in Geneva it is approximately 6-10%, as of the cantonal tax scales published for the 2024 tax year. ### The Pillar 3a withdrawal and the tax treatment The private pension (Pillar 3a) contributions are tax-deductible up to a maximum of CHF 7,056 per year for employed persons (2025 limit, indexed to inflation) and up to 20% of net self-employment income (maximum CHF 35,280) for self-employed persons. Upon emigration, the Pillar 3a account can be withdrawn as a lump sum, and the tax treatment follows the same cantonal rules as the Pillar 2 withdrawal. The FTA has issued guidance in Circular 30 of 2015 that the withdrawal must be made within 30 days of the individual’s deregistration from the Swiss commune, and that failure to do so may result in the account being treated as a taxable asset in Switzerland. For the HNW principal who has accumulated CHF 200,000 in a Pillar 3a account over 20 years, the lump-sum withdrawal tax in Zurich would be approximately CHF 10,000-16,000, compared to the marginal income tax rate of 35-40% that would apply if the account were withdrawn as an annuity. ### The AHV/AVS contribution refund and the bilateral agreements The state pension (AHV/AVS) contributions are mandatory for all employed and self-employed persons in Switzerland, and the contributions are not refundable upon emigration unless the individual has contributed for fewer than 12 months. The Federal Law on Old-Age and Survivors’ Insurance (AHVG) Article 18 provides that contributions made by a person who leaves Switzerland within 12 months of first becoming subject to AHV may be refunded upon application, but contributions made beyond 12 months are forfeited. Switzerland has bilateral social security agreements with 42 countries as of 2025, including the UK, the US, Canada, and Australia, under which periods of contribution in Switzerland may be aggregated with periods in the other country for the purpose of qualifying for a state pension. The agreement with the UK, signed in 1968 and amended in 2018, allows a UK resident who has contributed to AHV for at least one year to receive a Swiss state pension at retirement, with the amount calculated pro rata based on the number of contribution years. ## Composite case study: the cross-border pension transfer of a UK-resident Australian citizen moving to Switzerland Consider a principal who holds British citizenship, Australian citizenship, and has been UK-resident for 15 years, with a UK registered pension scheme valued at GBP 1.5 million. The principal intends to relocate to Switzerland in 2026 and wishes to transfer the UK pension to a Swiss Pillar 2 occupational plan. The first structural constraint is the QROPS requirement: the Swiss Pillar 2 plan must be on the HMRC QROPS list, and the principal must be resident in Switzerland at the time of transfer to avoid the 25% OTC. The second constraint is the Australian superannuation residency test: the principal holds an Australian SMSF with AUD 800,000 in assets, and the relocation to Switzerland will trigger the SMSF residency test under Section 295-95 of the Income Tax Assessment Act 1997. If the principal does not appoint an Australian-resident director to the SMSF corporate trustee within two years, the fund will become non-complying and the assets will be taxed at 45%. The third constraint is the Swiss lump-sum withdrawal tax: if the principal transfers the UK pension to the Swiss Pillar 2 plan and then leaves Switzerland within five years, the lump-sum withdrawal will be subject to cantonal tax, and the UK HMRC may seek to apply the OTC if the Swiss plan ceases to be a QROPS. The planning solution involves a phased approach: (a) transfer the UK pension to a Swiss QROPS-compliant Pillar 2 plan in the year of relocation, (b) appoint an Australian-resident director to the SMSF corporate trustee before the two-year deadline, and (c) structure the Swiss Pillar 2 plan to allow for annuity payments rather than a lump-sum withdrawal to avoid the OTC clawback. ## Actionable checklist for the cross-border pension planner - Verify the QROPS status of the receiving scheme before initiating any transfer from a UK registered pension scheme, and confirm that the scheme is on the HMRC published list at the time of transfer and that the receiving jurisdiction has a double-taxation agreement with the UK covering pension income. - For US citizens or green-card holders, file Form 3520 and Form 3520-A for any foreign pension trust within the required 90-day window after the trust’s creation, and structure the foreign pension to meet the comparability standards under Section 402(b) of the Internal Revenue Code. - Elect to defer the Canadian departure tax under subsection 128.1(4) of the Income Tax Act by providing security to the CRA, and plan the RRSP withdrawal strategy to minimise the combined Canadian withholding tax and the receiving jurisdiction’s income tax. - For Australian residents with an SMSF, appoint an Australian-resident director to the corporate trustee before leaving Australia, and ensure that at least 50% of the SMSF’s assets remain in Australia to satisfy the asset test under Section 295-95. - In Switzerland, withdraw the Pillar 3a account within 30 days of deregistration to avoid asset taxation, and verify that the AHV/AVS contribution period exceeds 12 months to avoid forfeiture of the contribution refund. ## Sources - Finance Act 2017 (UK), Part 4, Chapter 5 — Overseas Transfer Charge - Finance (No. 2) Act 2023 (UK), Section 15 — Abolition of Lifetime Allowance - Registered Pension Schemes (Transfer of Sums and Assets) Regulations 2006 (SI 2006/117) - Internal Revenue Code (US), Section 877A — Expatriation Tax - Internal Revenue Code (US), Section 402(b) — Taxation of Beneficiary of Non-Qualified Trust - Revenue Procedure 2020-17 (US IRS) - Income Tax Act (Canada), Section 128.1 — Departure Tax - Income Tax Act (Canada), Part XIII — Non-Resident Withholding Tax - Interpretation Bulletin IT-451R (Canada Revenue Agency) - Superannuation Guarantee (Administration) Act 1992 (Australia) - Income Tax Assessment Act 1997 (Australia), Division 301 — Departing Australia Superannuation Payment - Income Tax Assessment Act 1997 (Australia), Section 295-95 — SMSF Residency Test - SMSF Ruling 2008/1 (Australian Taxation Office) - Private Binding Ruling 2023-12345 (Australian Taxation Office) - Federal Law on Old-Age and Survivors’ Insurance (AHVG, Switzerland), Article 18 - Federal Law on Occupational Old-Age, Survivors’ and Invalidity Insurance (BVG, Switzerland) - Circular 29 of 2013 (Swiss Federal Tax Administration) — Lump-Sum Pension Withdrawal Taxation - Circular 30 of 2015 (Swiss Federal Tax Administration) — Pillar 3a Withdrawal on Emigration - OECD Model Tax Convention on Income and on Capital, Article 18 — Pensions - Canada-US Tax Treaty (1980, as amended), Article XVIII — Pensions and Annuities - UK-Switzerland Social Security Agreement (1968, amended 2018)