International SIPP (Non – Resident SIPP)
An international SIPP (Self Invested Personal Pension) is exactly as it sounds in that it is the international (non-resident) version of a standard UK SIPP. Initially introduced as an alternative option to the QROPS (Qualifying Recognised Overseas Pension Scheme) which were often missold, required taking monies out of UK jurisdiction and allows unregulated investments to be held within them. There are many international SIPP benefits.
Key International SIPP Benefits
Regulation / Protection – As the trustees are still in the UK the SIPP provider is required to be regulated by the FCA (Financial Conduct Authority), as such providing you with the highest level of protection possible.
Tax relief – as the SIPP is still held within the UK any further contributions qualify for UK tax relief much as regular SIPP. Note for an expat this is only for the first 5 years of having lived outside of the UK. There is also no need to repatriate monies if returning to the UK as your monies have never left the UK.
Consolidation of existing pensions – Often over a lifetime you may have built up pension pots from employment at various companies. By consolidating into one scheme you can significantly reduce cost and allow the portfolio to be managed more efficiently and in line with your objectives and future requirements.
Low cost – International SIPP’s start at zero setup and £180 per annum compared to a QROPS (£750 setup and £850 per annum) or onshore
Regulated investments – Only UK standard Assets can be held within an International SIPP ensuring your investments are readily available when required.
Negate Currency Risk – As the product has specifically been created for non-residents it allows you to hold multi-currency investments. The last 6 months have shown how big a risk currency is with sterling having dropped over 5% against the dollar and Euro.
Flexi Access – A key international SIPP benefit is that Under UK pension legislation you gain from flexi access which means you can access 25% of pension tax-free (in the UK) from the age of 55 and the remainder on an adhoc basis as and when required (income tax applicable in the country you reside in)
No OTC if outside the EEA – Introduced in the Spring budget of 2017 any transfer outside of the UK (i.e a QROPS) for a resident outside of the EEA (European Economic Area) would incur an Overseas Transfer Charge (OTC) of 25% of the total pension value.
Extensive investment choice – All company schemes will have on panel restricted fund ranges that are often expensive. An international SIPP allows access to over 5000 funds including multi-currency ETFS (index-tracking funds like Vanguard) at a very low cost.
Ongoing Management – Any company scheme will be managed on mass along with all other employees / former employees monies. An international SIPP allows you to utilise an International or local Independent financial adviser who can build a bespoke portfolio to match your current, ongoing and future needs.
When may an International SIPP not be the best option?
There are many factors to consider prior to answering this question that all relate to the individual’s unique position. However a couple of scenarios standout:
- If you are only living outside of the UK for a short period of time and a return is imminent. On this basis, it makes no sense to incur the cost of transferring existing pensions and you are better off to deal with it upon your return.
- If you are nearing your LTA (Lifetime Allowance Limit) One of the key benefits of a QROPS is regarding LTA as there is none (based upon the time of transferring your pension in and the valuation at the time). Currently, the LTA is £1.055m, unless you have applied for previous protection anything over this amount can be taxed at up to 55 %.
Where do I start?
As always, the best place to start is to speak to a professional. In this instance that would be a regulated, qualified, fully independent Financial Adviser. From here we can complete a full pension review, discuss your current and future plans before we advise on the best route forward. Harrison Brook specialises in advising expats on their pensions. We utilise regulated international solutions, working only on a transparent fees basis.
Get in touch to see how we can help.