What is a SIPP?

A Self-Invested Personal Pension (SIPP) is a type of UK pension that allows individuals greater control over their retirement savings, Key features of a SIPP include:

1. Wide Investment Options: You can invest in shares, exchange-traded funds (ETFs), investment trusts, bonds, and commercial property, among other options. This flexibility is one of the main attractions for investors.
2. Tax Relief: SIPPs offer tax relief on contributions. For UK residents, contributions made to a SIPP receive tax relief at the individual’s marginal tax rate, making them an attractive option for building retirement savings.
3. Control and Flexibility: Unlike many traditional pension schemes that limit investment options, SIPPs allow you to make your own investment decisions or have a financial adviser manage your investments.
4. Tax-Free Growth: Investments held within a SIPP grow free from capital gains tax and income tax on investments, which can help maximise your retirement savings.
5. Access to Funds: From age 55 (rising to 57 in 2028), you can start accessing your SIPP funds, including taking up to 25% as a tax-free lump sum, with the rest subject to income tax

What is a QROPS?

A Qualifying Recognised Overseas Pension Scheme (QROPS) is an overseas pension scheme that meets HMRC’s requirements to receive UK pension transfers. It’s designed for people who are moving abroad permanently or are already living overseas, providing greater flexibility with how their pension can be accessed.

Who can benefit from a SIPP?

Anyone who wants more control over their pension investment. It’s ideal for individuals looking to diversify their pension portfolio beyond what’s available in traditional pension schemes or who wish to work with a financial adviser to create a more personalised retirement plan.

Who should consider a QROPS?

A QROPS may be suitable for UK expatriates or those planning to retire abroad. It can offer potential tax advantages, access to your pension in your country of residence, and more control over your retirement funds without being subject to UK pension rules.

What are the tax implications of transferring to a QROPS?

Transferring to a QROPS may incur a tax charge known as the Overseas Transfer Charge, which is 25% if the amount you are looking to transfer is over a specified amount. It’s crucial to seek advice to fully understand the tax implications of a QROPS transfer. Additionally tax charges may be due where the QROPS does not meet the eligibility criteria

Can I transfer my SIPP to a QROPS?

Yes, it is possible to transfer a SIPP to a QROPS. This could provide more flexibility and tax benefits depending on your country of residence, but it’s essential to get professional advice to determine if it’s right for you.

How do I know which option is best for me?

The choice between a SIPP and a QROPS depends on your individual circumstances, including your country of residence, and retirement goals.

What happens to my QROPS if I move back to the UK?

If you return to the UK, your QROPS will still remain valid, but it will be subject to UK regulations and tax rules. It’s important to assess the impact this move will have on your pension benefits and tax position.

Should I transfer my QROPS back to a UK pension scheme?

Transferring your QROPS back to a UK-based pension, such as a SIPP, could be beneficial in some cases. However, this decision will depend on your individual circumstances, taxation and costs should be considered.

Will my QROPS be taxed when I return to the UK?

If you become a UK resident again, your QROPS will be subject to UK income tax on any withdrawals you make.

Are there any penalties for transferring my QROPS back to a UK pension?

There may be fees associated with transferring your QROPS back to a UK pension, such as exit charges from your current scheme but there are typically no penalties. It’s important to review the terms and conditions of your QROPS to understand any potential costs.

How do I get advice on managing my QROPS when returning to the UK?

Contact a qualified financial adviser with experience in cross-border pensions. They can help you evaluate whether transferring your QROPS or keeping it overseas is the best option for your retirement plans and financial well-being.

How are SIPPs taxed in the UK?

In the UK, a SIPP benefits from tax relief on contributions, meaning contributions can reduce your taxable income. Investment growth is free from CGT and withdrawals are taxed as income. You can usually take 25% of your SIPP as a tax-free lump sum, with the rest being subject to income tax at your marginal rate.

What happens to my SIPP if I move abroad?

If you move abroad, your SIPP remains invested in the UK. You can still access your SIPP, but contributions will only receive UK tax relief up to a specified amount for a specified period. Any income you withdraw from your SIPP will generally still be subject to UK income unless you are able to use a double taxation treaty where the taxing rights are given to your country of residence.

Are there tax implications on SIPP withdrawals while living abroad?

Yes, withdrawals from a SIPP are generally taxed as income in the UK, but the tax treatment in your country of residence may also apply. It is important to check if your country has a Double Taxation Agreement (DTA) with the UK to avoid being taxed twice.

How can I avoid double taxation on my SIPP withdrawals?

To avoid double taxation, you can apply for tax relief under a Double Taxation Agreement (DTA) between the UK and your country of residence. This could reduce or eliminate UK withholding tax on your SIPP withdrawals, depending on local tax rules.

Is my SIPP or QROPS subject to inheritance tax (IHT)?

SIPPs are generally outside your estate for UK inheritance tax purposes, which means they can be passed on to beneficiaries without incurring IHT. However, the tax treatment will vary depending on whether you pass away before or after age 75. Pensions are still not subject to IHT, although, typically when the member passes away after age 75 the beneficiary will be taxed at their marginal rate of withdrawals.

Can I still contribute to my SIPP if I live abroad?

You can continue to contribute to your SIPP if you live abroad, but the eligibility for UK tax relief will depend on whether you have relevant UK earnings or meet specific residency conditions.

What is the new Lump Sum Allowance?

The Lump Sum Allowance is the maximum tax free amount that can be withdrawn from a pension as a lump sum without incurring an additional tax charge. With the abolition of the lifetime allowance, lump sum withdrawals above the tax-free portion are now taxed at the recipient’s marginal income tax rate.

How much of my SIPP can I withdraw tax-free?

If you have no protection in place and do not benefit from protected tax free cash You can withdraw up to 25% of your pension tax-free, subject to a limit of £268,275. This amount is known as the “lump sum allowance” and represents the maximum tax-free lump sum you could have received under the previous lifetime allowance rules.

How much of my QROPS can I withdraw tax-free?

Some QROPS will permit members to withdrawal 30% tax free cash, however if the funds were derived from a UK scheme and certain conditions are met this is restricted to 25% much like. And much like a SIPP this will be subject to the UK’s current prescribed limit of £268,275. This amount is known as the “lump sum allowance” and represents the maximum tax-free lump sum you could have received under the previous lifetime allowance rules.

What if you had lifetime allowance protection in place?

Lump sum allowance and lump sum and death benefit allowance where lifetime allowance protection applies. Although the lifetime allowance no longer applies from 6 April 2024, the various forms of lifetime allowance protection often also protect the amount of tax-free cash that can be paid to an individual.

How does the new lump sum death benefit allowance on pensions affect my beneficiaries?

Beneficiaries should consider the timing and method of receiving death benefits, as this can have different tax implications. Receiving funds as income may be more tax-efficient than a lump sum, depending on their personal circumstances.