The International SIPP
A SIPP (self invested personal pension) is a personal pension that offers greater investment flexibility during your retirement than some other pensions. Enhanced options and control over the assets you invest in means you can have more influence over the results, which depend upon how the assets selected perform.
Contributions to UK SIPPs 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'. Access to capital is available from age 55 onward, so if you are looking to invest further to enhance your retirement fund as an expat, using more flexible products may be advisable.
It is important to recognise that many providers of expat international SIPPs still allow the purchase of securities not permitted in the UK, including commission-generating share classes of funds with higher underlying charges and lower returns for investors.
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 even if you are still working. SIPPs allows you choice over how you take benefits with the option to take a lump sum. A PCLS (pension commencement lump sum) of up to 25% is available tax-free at the time you decide to access your pension. 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 to the individuals you have selected by a lump-sum, flexi-access drawdown or an annuity purchase. Scheme administrators decide how and to whom the benefits are paid, taking into account the member's wishes.
How the benefits on death 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.
After years of only expensive international SIPPs being available, prices have reduced to levels similar to the UK. Many providers have removed set-up fees and annual ongoing costs can be as low as £180, making a comparison against using a QROPS essential as the costs can be significant.
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 should not in any one tax year surpass the greater 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 during a Pension Input Period. For 2020 / 2021 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, the differences between QROPS and how to consolidate multiple schemes into one, easy to manage investment.