UK SIPP Abroad as a Non-Resident
One of the main concerns Expats have when moving abroad is managing their retirement provisions and pension pots. Cross-border financial planning has been a notoriously tricky area, with various tax-wrappers, pensions and products in play. So what are the options as a non-UK resident, and can you still have a SIPP (self-invested personal pension) or set up a brand new SIPP?
Existing SIPP Accounts for Expats
If you have an existing SIPP in the UK but have moved abroad, it’s important to understand your options, as well as the taxation treatment of any draw-down. A UK SIPP is a HMRC registered pension scheme that complies with UK Pension laws. As such, as a UK resident you can receive and claim tax relief on the contributions into the pension pot.
As a UK resident, a SIPP offers great flexibility when it comes to your retirement. Once you reach the age of 55, you are entitled to a one time 25% Tax Free Cash payment, also known as your Pension Commencement Lump Sum (PCLS). From there, you can leave the remainder of your funds invested and draw-down income as and when required, on a full flexi-access basis. The income taken from your UK SIPP would be taxed at your marginal rate of taxation.
However, this tax free cash payment and income tax is applicable for UK residents – not necessarily for Expats. This depends on your country or residence, its tax rules, as well as the double-taxation agreements in place.
Can I still Contribute to my SIPP Abroad?
Generally speaking, you cannot continue to make contributions to your UK SIPP if you no longer live in the UK. Furthermore, there is little reason to do so.
The main reason for contributing to a Pension is to receive tax-relief on money that goes in. Depending on how long you have been outside the UK, this is no longer applicable (some SIPPs may allow tax relief on minimal contributions). Not only this, but some SIPPs will not allow any contributions whatsoever.
Taking Income from my SIPP Abroad
A UK SIPP, as you’d expect, is a retirement product that is built and tailored for UK residents. So what are the implications of this if you live abroad?
The first thing to note would be the tax free cash payment. Whilst being tax-free in the UK, this is not the case abroad, and it’s vital to take local tax advice to discover the local tax treatment of any payment, to avoid any nasty surprises.
When it comes to drawing down an income, there can be several issues. The first being tax deducted at source in the UK. This can lead to length administrative procedures trying to claim back UK tax from HMRC, and also double-taxation issues when you are taxed locally. It’s vital to apply for a Nil-Tax code if you are no longer UK residents. This will ensure any payment is made gross of UK taxation.
You may also have to contend with currency conversion fees, bank transfer fees, and lengthy administrative hold-ups. All of this is a consequence of utilizing a product that is not built, or tailored for Expats and UK citizens abroad.
Is there a Better Options for my SIPP Abroad?
Given that there are over 1.5 million British citizens living in Europe alone, there is no surprise that several UK companies have entered the International Expat market to offer more convenient products.
The most modern and most used product is currently the International SIPP, due to it’s flexibility and low-cost features
What is an International SIPP?
An International SIPP is still a UK registered pension scheme – except that it is built and completely tailored to expats living outside the UK. An International SIPP offers the following benefits:
- It’s fully regulated by the FCA and fully covered by the Financial Services Compensation Scheme (FSCS), offering maximum protection to clients.
- It’s currently the lowest cost International Pension Solution available on the market, with costs from £0 set up and just a £180 annual trustee fee.
- It has a brand new and modern online interface, allowing for comprehensive and complete tracking of performance, costs, transactions, as well as a research hub to view all fund offerings, similar to most UK SIPPs.
- It offers investments and cash holdings in all major currencies, meaning you can hedge against currency risk and hold in local denominations (especially relevant with Brexit and the £). There is also the facility to exchange currency at a live rate for a nominal transaction cost.
- Income payments can be made gross to any bank account in the world. This is a far easier way of drawing down an income when compared to a UK Standard SIPP, since it’s built for international clients.
Should I Transfer to an International SIPP?
The decision to transfer from a Standard SIPP will depend entirely on your circumstances, as well as your objectives and priorities. It’s always important to take fully independent financial advice before making a decision on your retirement planning.
Contact us today for a free initial consultation to see how can help with your Expat Financial Planning.
The information contained herein is for informational purposes only which is subject to change and should not be relied upon. You should seek advice from a professional adviser before embarking on any financial planning activity.