The self-invested personal expat pension
A SIPP (self invested personal pension) is a personal pension that offers greater flexibility investing your retirement funds than other pensions. Enhanced control investing your assets means you can have more influence over the results which will depend upon how the assets selected perform.
Contributions to SIPPs in the UK offer tax incentives. For the majority of expats consolidating pensions or moving final salary schemes into a SIPP, further contributions only attract tax benefits if criteria are met as a 'relevant UK individual' paying tax. Access to capital is available from age 55 onward, so if you wish to invest further contributions as an expat, more flexible products may be advisable.
It is important to recognise that many providers of expat international SIPPs will allow the purchase of securities not permitted in the UK. Expat financial advisers overseas can receive remuneration from fund managers for promoting their expat investments, usually resulting in higher charges for the investor.
The guidelines for SIPPs allow for diversification with a wide range permitted investments categorised as 'standard assets' by the UK regulator, the Financial Conduct Authority.
Managed pension funds
Exchange traded products (ETFs)
Real estate investment trusts (REITs)
Government, local authority and other fixed interest stocks
Collective investment schemes (CIS) in the UK (or overseas and recognised by the FCA)
Stocks, equities and shares
Structured products (with a degree of secondary market liquidity)
Not permitted include:
Movable assets (wine, collectable cars, antiques and art)
Drawdown from a SIPP can begin from age 55, and if you are also still working. SIPPs allows you choice over how you take benefits and first, how much to take as a lump sum. A PCLS (pension commencement lump sum) of up to 25% is available tax-free at the time you decide how your pension income will be paid. The remainder of the fund will be taxed at your prevailing tax rate as income, lump-sum payments or a combination of both options by:
Drawdown of pension income
Uncrystalised funds pension lump-sums (UFPLS)
Benefits on Death
On the death of the member benefits are paid as a lump sum or to the individuals you have selected through flexi-access drawdown or an annuity purchase. Scheme administrators decide how and to whom the benefits are paid, taking account of wishes stated in the application.
How remaining funds are distributed differs according to age at the time of death.
• On death before 75, benefits will be paid free of UK tax whether taken as either lump sum or income.
• Death at or after 75, income payments will be subject to UK income tax at the beneficiaries marginal rate of tax.
SIPPs in the UK are cheap, however costs usually increase for schemes created with expat investing in mind. Set-up costs range from zero to £300 with ongoing annual charges of between £170-£750. Cheaper 'light' versions are also available for smaller values.
Pension Tax Relief
SIPP contributions are permitted under the age of 75. For non-UK residents the rules differ, but if you are receiving UK earnings you should qualify for tax relief which under Section 188 of the Finance Act 2004 will not in any one tax year surpass the larger of:
• £3,600 - the basic gross amount for the current tax year, or
• 100% of all relevant UK earnings in the current tax year
(subject to limits below)
Annual allowances apply to payments that qualify for tax relief into any number of your own registered pension schemes in a Pension Input Period. For 2018 / 2019 the allowance is £40,000 and for individuals that do not have relevant UK earnings, including expats, the allowance is £3,600 gross.
Contact us today to learn more about expat pension transfers, International SIPPs and how to consolidate multiple schemes into one, easy to manage investment.