Lived or worked in the UK, and now reside in South Africa. Uncertain about UK pensions in SA? Should you leave your pension in the UK? Is transfer possible? What tax implications apply under the UK–South Africa treaty? Edale unpacks what South African residents need to know about UK pensions, explores your options, and key considerations to make informed decisions.
Common types of UK Pensions: Defined Benefit vs Defined Contribution SA residents hold
The first step in understanding your options is determining what kind of pension you hold. Your options depend primarily on what type you have.
- Defined Benefit (DB) (a.k.a. “final salary” or “career average”): your pension is characterised by an amount based on years of service and a salary metric (e.g. final salary).
Example: If your scheme has a formula of (years/60) × final salary, with 20 years and final salary £90,000, you’d get (20/60) × £90,000 = £30,000 p.a. in retirement. - Defined Contribution (DC): your pot is a sum based on contributions plus investment returns. At retirement, you can access it by taking withdrawals or using it to buy an annuity, or via income drawdown.
Defined Benefit pension for SA Resident
South African’s with a UK Defined Benefit (DB) pension have a highly advantageous scheme to access. Preserving the pension in its original UK structure offers a range of benefits related to security, tax efficiency, and simplicity, particularly when coupled with the strategic use of an NT (Nil Tax) code. Defined Benefit pensions are a valuable commodity. This is because these types of pension provide an income for life and you are not reliant on the performance of the fund or investment vehicle you have. So, for a South African resident who has a UK DB pension, why take the benefits? The arguments for doing this are significant and compelling and can be summarised as follows:
- Guaranteed Income for Life: A DB pension promises a guaranteed income for life. The level of this income is set in advance and, importantly, it is usually inflation-proofed. This means the level of your pension increases each year in line with inflation, thus protecting your standard of living throughout your retirement.
- No Investment Risk: With a DB scheme, the risk is on the pension scheme provider and not you. You do not need to worry about investment performance and you are promised a certain level of income.
- Spouse’s and Dependant’s Pension: Most DB schemes pay a pension for your spouse (or financial dependant) when you die. This provides additional financial security for your loved ones.
- Problematic and Costly Transfers: Transferring a DB pension out of the UK is difficult and in many cases expensive. In any event, since there are currently no South African pension schemes on HMRC’s list of Qualifying Recognised Overseas Pension Schemes (QROPS) it is not possible to make a direct transfer without your pension suffering an unauthorised payment tax charge of at least 40% on transfer. While it is possible to transfer your DB pension to an international Self-Invested Personal Pension (SIPP), this means giving up the guaranteed income of a DB scheme in favour of a DC fund and subjecting yourself to the vagaries of the financial markets.
The single most important step to take to get the most from your UK DB pension as a South African resident is to obtain an NT (Nil Tax) code from HM Revenue & Customs (HMRC).
An SA Resident Moving a Defined Benefit pension to SIPP
Transferring out of a UK Defined Benefit (DB) pension scheme to a SIPP for a South African resident is a huge and life-changing decision that must not be taken lightly. You are giving up a guaranteed income for life, with no exposure to investment risk, for a pot of money which you will then have to manage yourself. The benefits of a DB scheme – a guaranteed, inflation-proofed income for life with no investment risk for members – are very attractive and security for most people’s first choice of pension. These are benefits which are very difficult and expensive to replicate with any other form of pension provision. Transferring to a SIPP may be a good option for a minority of people in specific circumstances. For example, someone with other substantial and guaranteed sources of retirement income, someone in very poor health, or a high net worth individual with the resources to pay for sophisticated investment and financial advice.
The attractions of flexibility
A SIPP is a form of UK-registered Defined Contribution (DC) pension scheme that provides an extremely wide range of investment options. The main benefits of transferring a DB pension into a SIPP for a South African resident are as follows:
- Investment freedom. A SIPP allows full control over the investments that your pension is held in, which can include many investment products not usually available in DB schemes. A SIPP should potentially allow you to achieve higher investment growth.
- Flexible access to retirement funds. From age 55 (increasing to 57 from April 2028), you can take 25% of your SIPP savings tax-free as a lump sum and start drawing an income from the rest. The income and any further lump sums can be taken at a rate and frequency that you choose, for example a regular monthly income, ad-hoc withdrawals as required or via an annuity purchase.
- Death benefits. Modern SIPPs provide greater flexibility when it comes to passing on your pension wealth when you die. Any funds remaining in a SIPP when a member dies can usually be passed on to your beneficiaries free of UK inheritance tax, although your beneficiaries will be responsible for any South African taxes due. By contrast, most DB schemes have restrictions, such as a spouse’s and dependent’s pension being reduced after a fixed period or even stopping altogether.
- Currency exchange control. By holding your pension in a SIPP you are free to choose how much, and when, to convert from pounds sterling to South African rand, potentially allowing you to benefit from favourable exchange rates.
The irreversible loss of guarantees
The problem is, in giving up a DB scheme, you lose a number of valuable and sometimes irreplaceable benefits, for example:
- Guaranteed lifetime income. This is the main “franchise” that a DB scheme offers you. It’s a guaranteed income for life, which is usually also inflation-proofed and which does not go down if the investments of the pension scheme do badly. A SIPP has no such guarantees.
- No investment risk for members. The investment risk of a DB scheme is taken by the scheme, not the members. In a SIPP the member takes all the investment risk. Poor investment performance could seriously damage the income you are able to take.
- Spouse’s and dependant’s pensions. Most DB schemes offer a valuable, continuing pension to your surviving spouse, civil partner or financial dependants when you die, whereas a SIPP is merely a pot of money.
- Protection by the Pension Protection Fund (PPF). UK DB schemes are protected by the PPF. This is a government-backed safety net which pays compensation to members if their employer becomes insolvent and the pension scheme is unable to meet its commitments. When you transfer to a SIPP this protection is lost.
Factors to consider as a South African resident
If you are a South African resident contemplating a transfer of DB to SIPP, here are some of the issues that are of particular relevance to you:
- It’s the law. For DB pensions with a transfer value of over £30,000 you are required to take financial advice from a qualified and regulated financial adviser who holds the necessary pension transfer specialist permissions, under UK law. This is to protect you from giving up your guaranteed benefits without fully understanding the consequences of doing so.
- Transfer values. Current low interest rates mean that DB schemes are having to offer very high transfer values (known as cash equivalent transfer values or CETVs) to induce people to transfer out. The attraction of this large lump sum is understandable, but remember that it has to last you for the rest of your life, and be sufficient to provide an income that replaces the one you are giving up.
- Complexity and costs. A SIPP requires a certain level of financial understanding and ongoing management attention. You will also have to pay administration and investment management charges on your SIPP, which will eat into the value of your pension pot.
Can You Transfer a UK Pension to South Africa?
Its not possible to move a UK pension to South Africa. HMRC rules state that any transfer of UK pension funds must be to a recognised overseas pension scheme. Most South African schemes do not appear on HMRC’s recognised list of schemes. Current status (2025): As of this writing there are no South African pension schemes on HMRC’s list of recognised overseas pension schemes (ROPS / QROPS) that accept UK pension transfers.
Consequences of non-qualified transfer: If you do a transfer to a non-approved scheme, HMRC can treat it as an unauthorised payment and levy a 25% (or more) tax charge on the transfer value.
This is why many UK-to-SA pension transfers are blocked or face large penalties, so they are often not an option.
What Are The Options for SA Residents with UK Pension (and Pros / Cons)
Given that direct transfer is usually not possible, here are your primary alternatives:
| Option | Description | Pros | Cons / Risks |
|---|---|---|---|
| Leave your pension in the UK | Do nothing; let your pension remain under the UK scheme | You retain the familiar structure, avoid transfer costs, maintain regulatory protection | Currency risk, UK tax rules, less flexibility in SA |
| Transfer to a UK SIPP (Self-Invested Personal Pension) | Consolidate DC pensions into a UK SIPP | Greater investment choice, control, ease of management | Still governed by UK regulations and accessibility restrictions |
| Greater investment choice, control, and ease of management | If a qualified scheme exists, you may move the pension (not permitted in SA’s case) | ||
| Convert or integrate into SA retirement instruments | If SA law changes or future recognition occurs, move funds locally | Alignment with South African retirement planning | Current legal constraints, currency risk, tax exposure |
When comparing options, always weigh:
- Tax implications (UK and SA)
- Currency risk and exchange rate volatility
- Fees and transfer costs
- Regulation / protection / oversight
- Flexibility & access in retirement
The “best” option depends heavily on your individual situation (size of pension, tax residence status, future plans).
Practical Steps & Considerations
If you are a South African resident evaluating your UK pension, then the following is a useful checklist to consider:
- Confirm your tax residency status in SA
- Get full details of your UK pension(s) – scheme type, transfer value, any restrictions
- Check HMRC’s published list of recognised overseas pension schemes for SA (if any)
- Request a pension transfer / comparison quote from your provider
- Model currencies & income flows – estimate what you would actually receive (net) after tax, withholding, exchange etc.
- Consider drawing strategy – whether to take lump sums, phased drawdowns, annuity etc.
- Seek independent cross-border pension advice
- Review periodically – tax treaties, laws, schemes etc. may change over time
UK SA Pension Taxation & Double Tax Treaty (UK ↔ South Africa)
Understanding how pensions are taxed is important.
- SA tax residency: If you are tax resident in SA (ordinary or physical presence test) then SA will generally tax you on your worldwide income.
- UK–South Africa Double Taxation Agreement (DTA): Pensions (earned from employment) are normally taxable in the country of residence (i.e. SA), but there are exceptions under the treaty
- UK State Pension / Government pensions: Some state/government pensions may be assessed first in the UK, depending on the source country.
- Foreign pension exemption in SA: Some UK pensions that were earned outside SA may be exempt from SA local income tax, but conditions apply, and claiming this can be administratively complex.
- Withholding tax / source tax: UK pension payments to foreign recipients may be subject to withholding implications depending on tax treaties and HMRC regulations.
- Unauthorised transfer tax: As discussed above, transferring into a scheme that is not approved by HMRC can result in a UK tax charge (~25%) being levied on the amount transferred.
Given all these layers, many people find the simplest solution is to leave the pension under UK control and draw down from it in retirement, and manage the tax consequences.
The NT Tax Code (HMRC – United Kingdom side)
An NT tax code (a No Tax Deducted at Source – code) in the UK means “No Tax” – i.e., no UK income tax should be deducted by the employer or pension provider. Issued by HMRC (His Majesty’s Revenue and Customs, the UK equivalent of SARS) the code is typically applied to pension income or employment income where HMRC has accepted that the individual is not UK tax resident, or where the income is taxable abroad under a double tax treaty (such as the South Africa–UK double tax treaty).
When you can get an NT tax code
You can apply for an NT tax code if:
- You are living outside the UK (i.e., non-resident for UK tax purposes), and
- Your UK pension income or other UK employment income is covered by a double taxation agreement (DTA) that gives taxing rights to your country of residence (in this case South Africa).
Under Article 17 of the double taxation agreement between the UK and South Africa:
“Pensions and other similar remuneration paid to a resident of South Africa in consideration of past employment shall be taxable only in South Africa.”
So, if you now live in South Africa and are tax resident there, your UK private pension income should, in general, be taxable only in South Africa, not the UK. That’s what justifies an NT (No Tax) code from HMRC.
How to get an NT tax code
The steps to apply are:
- Complete the DT-Individual form, which is the HMRC form for “Double Taxation Treaty Relief for Non-UK Residents”.
- Available for download here on HMRC’s website: DT-Individual form.
- Part A & B are completed by the individual (personal details, type of income, pension provider, etc).
- Part C is to be certified by SARS to confirm you are resident in South Africa for tax purposes.
- SARS should sign and stamp the form to confirm your residence.
- Complete form and send to:
HMRC Pay As You Earn and Self Assessment
HMRC BX9 1AS, United Kingdom. - Once HMRC have processed the form they will issue a new tax code to the pension provider, usually “NT”.
- This should instruct the pension provider to stop deducting UK tax from pension payments.
Processing time
- Allow about 6–12 weeks for processing, subject to both SARS and HMRC turnaround.
- Once issued the NT code should remain in place indefinitely while your tax residency situation remains the same. However you may be asked to re-certify this every few years or when a new pension provider requests confirmation.
What it achieves
Once the NT tax code has been applied, your pension will be paid gross (i.e., with no UK tax withheld). You will then need to declare and pay any tax due in South Africa (in which case it will be fully tax-free of tax in the UK due to the SA–UK DTA) — or, as we will explain below, sometimes none at all if it’s exempt under current South African law.
SARS and Overseas Pension Income (South African Side)
Now, on the South African side of the equation. As things stand under current South African law (2025):
- Foreign pension income (from the UK, for example) is not taxable in South Africa, if it arises from past employment outside South Africa.
- This is because it is exempt from tax by Section 10(1)(gC) of the South African Income Tax Act, which exempts foreign pensions from tax if:
- The services were rendered outside South Africa, and
- The pension is paid from a foreign source (e.g., a pension scheme based in the UK).
In plainer language:
A South African resident who receives a UK pension (for UK work done outside South Africa) currently pays no tax in South Africa on that income.
In other words:
- HMRC applies the NT code → no UK tax withheld
- SARS exempts the pension → no SA tax payable
This is a result of double non-taxation (tax-free in both countries), which we are told is likely to change in the future.
Overseas Pension Income in SA Future Tax Changes (South African Budget 2025)
The SA Treasury has announced in the recent 2025 Budget Review that it intends to narrow or remove the foreign pension exemption in section 10(1)(gC). If this comes to pass, the likely result will be that:
- South African residents will begin to pay tax on foreign pension income (including pensions from the UK).
- The UK–SA double tax treaty (DTA) would still operate to prevent double taxation — any tax withheld in the UK would be creditable – but the foreign pension may become reportable and taxable in South Africa.
In other words, where the position currently is:
“UK pension = no UK tax (NT code) + exempt in SA (s10(1)(gC))”
… in the future it is likely to change to something like this:
“UK pension = no UK tax (NT code) + taxable in SA under new domestic law.”
Maximising UK pension income tax benefits in South Africa
| Step | Who | What Happens |
|---|---|---|
| Apply for NT tax code | HMRC (UK) | Submit DT-Individual form certified by SARS to stop UK tax being withheld |
| SARS certification | SARS (SA) | Confirms you are SA tax resident |
| Pension payments begin gross | UK provider | Paid without UK PAYE tax |
| South African tax treatment | SARS | Currently exempt under s10(1)(gC); may change in future |
Worked Example of SA Resident with UK Pension (Hypothetical)
Let’s imagine a hypothetical individual, Sarah:
- She has a UK DC pension pot of £200,000
- She is now a resident of South Africa
- She cannot transfer it out because no SA scheme is HMRC-approved
- She leaves it invested in the UK and, in retirement, draws an annual income of £10,000 after taking a lump sum for a retirement
This is a simplified example to illustrate the need to model net income flows under both jurisdictions.
Step 1 – Taking the UK lump sum
The UK rules allow a 25% tax-free lump sum from a pension.
Sarah takes £50,000 (25% of £200,000) as a tax-free lump sum directly from her UK pension.
No tax payable on the 25% tax free lump sum because:
- The UK-SA DTA gives the UK the right to tax lump sums, South Africa must exempt them (to avoid double taxation).
- And under Section 10(1)(gC) of the SA Income Tax Act, foreign pensions and lump sums from overseas employment are already domestically exempt.
Result (as of 2025):
- The 25% UK lump sum is exempt in the UK (under UK law) and not taxable in South Africa (under both the DTA and s10(1)(gC)).
Step 2 – Applying for an NT (No Tax) Code from HMRC
Before beginning regular pension withdrawals, Sarah completes HMRC Form DT-Individual, gets it certified by SARS, and submits it to HMRC.
HMRC accepts that:
- She is non-resident in the UK, and
- Her pension income is taxable only in South Africa under Article 17 of the UK–South Africa Double Taxation Agreement.
HMRC then issues an NT (No Tax) code to her UK pension provider.
That means her £10,000 annual pension is paid gross, with no UK income tax withheld.
Step 3 – South African tax position
Under current South African law (Section 10(1)(gC) of the Income Tax Act), foreign pensions are exempt from income tax in South Africa if they relate to past employment outside South Africa — which Sarah’s UK pension does.
Therefore, although Sarah must declare her UK pension income on her South African tax return, it is not taxable in South Africa under existing legislation (as of 2025).
Step 4 – Result
| Component | Jurisdiction | Tax treatment |
|---|---|---|
| £50,000 lump sum | UK | 25% tax-free under UK pension rules |
| £10,000 annual drawdown | UK | No UK tax withheld (NT code applied) |
| £10,000 annual drawdown | South Africa | Exempt under s10(1)(gC) — currently non-taxable |
Outcome: Sarah receives her UK pension income completely tax-free under current rules — but this may change if South Africa removes the foreign pension exemption in a future budget.
Step 5 – Future change watch-point
If South Africa amends Section 10(1)(gC) (as proposed in the 2025 Budget Review), Sarah’s future UK pension income may become taxable in South Africa, even though no UK tax is deducted. She would then need to include it in her South African taxable income going forward.
Why Work with Edale?
Edale specialises in cross-border pension planning and can help UK pension holders who are now living in South Africa understand their best options moving forward. Our advisers provide:
- In-depth pension transfer and tax analysis
- Scenario modelling (after-tax, currency, drawdown)
- Advice on UK and SA rules, and treaty applications
- Ongoing reviews and updates as laws change
For a no-obligation review of your UK pension options as a South African resident, contact us or book a call with one of our advisers.