Thinking about retiring abroad? At Scottsdale, our financial advisors specialise in guiding British expats through the financial complexities of relocating overseas.
An International SIPP stands for Self-Invested Personal Pension. It is designed for individuals living abroad or planning to retire overseas.
A SIPP is a UK-registered pension scheme that allows British expats to manage their retirement savings, potentially with greater flexibility and access to a wide range of global investments.
Find out more below.
What is a SIPP?
SIPPs are designed for people who want more involvement in managing their pension and who have experience or interest in investment.
The UK government regulates them, and they are typically suited for those with a “medium” to “high” level of pension savings or those seeking greater investment flexibility.
What makes a SIPP unique?
A SIPP is a type of personal pension, but it usually offers individuals greater control and flexibility over their retirement savings.
You can choose and manage your own investments from a wide range of options, including:
- Stocks and shares
- Bonds
- Mutual funds
- Commercial property
- Exchange-traded funds (ETFs)
SIPPS can also provide tax advantages, such as tax relief on contributions and tax-efficient growth on investments.
What is the difference between a SIPP and QROPS?
If you are an expat (or thinking about moving overseas), you may have heard of these two strange acronyms and be a bit confused! However, their core features are not too complicated.
A QROPS (Qualifying Recognised Overseas Pension Scheme) is a pension scheme based outside the UK that must meet certain requirements set by HMRC.
A SIPP, by contrast, is a UK-registered pension scheme that allows individuals to manage their retirement savings with full control over investments
ROPS and SIPPs: a comparison
A QROPS (or ROPS, as it is not officially called) may be suitable for specific UK expats relocating abroad permanently.
It can be a useful way to consolidate (combine) UK pension “pots” into a single scheme that you can “take with you” when you relocate.
For those who want to retain their pension in the UK but with maximum investment flexibility, a SIPP may be a more attractive option.
“Temporary expats” who don’t plan to permanently settle abroad may be attracted to a SIPP, as they may not want their pension to be left overseas when they repatriate.
SIPPs vs International SIPPs
The difference between a SIPP (Self-Invested Personal Pension) and an International SIPP lies primarily in their design, target audience and suitability for individuals living abroad.
A “normal” SIPP is primarily intended for UK residents or those with ongoing UK tax residency. An international SIPP offers features that help expats maintain their UK pension benefits while living or retiring abroad.
The former usually operates in GBP, with limited options for multi-currency accounts. The latter can offer multi-currency functionality, allowing investments and withdrawals in various currencies (e.g., USD, EUR).
With a SIPP, contributions are eligible for UK tax relief, and withdrawals are taxed under UK pension rules. T contributions and withdrawals for international SIPPs are designed to accommodate the tax requirements of expats.
The latter is also often structured to avoid double taxation by aligning with tax treaties between the UK and the expat’s country of residence.
Who can benefit from an international SIPP?
The multi-currency functionality of international SIPPS can help reduce the risk and cost of currency conversion for expats managing their pensions in foreign currencies.
They can also broaden access to global investment opportunities, including international stocks, bonds, ETFs and funds.
International SIPPS can also be tax-efficient. In some cases, contributions may still qualify for UK tax relief (subject to eligibility). They also do not attract the 25% Overseas Transfer Charge (OTC) that applies to some QROPS transfers.
What are the drawbacks of SIPPs?
An international SIPP may have higher setup and annual management fees compared to standard SIPPs, as they are tailored for expats.
Moreover, charges for multi-currency functionality or international compliance can increase overall costs. Changes in exchange rates can also impact investment returns and withdrawals.
The taxation of pension income in an expat’s country of residence can be complex and vary widely. Some jurisdictions may not offer favourable tax treatment, potentially reducing the advantages of an International SIPP.
Interested in starting a conversation about your pension with an expat financial adviser? Get in touch to arrange your free, no-commitment consultation with a member of our team.
We look forward to meeting you!
