What is an International Private Pension Plan?
As a non-UK resident, you may be wondering what your options are with regards to transferring your UK pensions, or perhaps even your overseas schemes. For the vast majority of people with UK pensions, the most common solution would be an International SIPP or a QROPS. The International SIPP is still a UK pension plan, but one that is built for non-UK residents. As such, it would allow you to access certain features that wouldn’t be available in a typical UK pension, such as:
- Full flexi-access draw-down
- Multi-currency options
- Whole of Market investment options
A QROPS on the other hand would see your funds transferred out of the jurisdiction of the UK (normally Malta or Gibraltar). These plans are more expensive than an International SIPP, however they do offer one very important benefit – the removal of the Lifetime Allowance Charge.
The Lifetime Allowance Charge (LTA) is a tax surcharge on pension benefits valued over 1,073,000 gbp. Anything over this amount will be taxed at an additional rate, depending on how it is drawn-down.
An Overseas Pension Transfer (40EE)
There is an alternative pension scheme that can be transferred into, and one that is particularly relevant for Overseas schemes offered by various multi-national corporations, such as Shell, BP among others. In these Overseas Schemes (sometimes based out of Bermuda), you do not receive any tax-relief on contributions, since the funds are not in the UK. You and your employer can contribute to this Overseas scheme on an ongoing basis.
The majority of these Overseas schemes will have guaranteed benefits. This means they will guarantee you an income payment per annum for life, or alternatively a Cash Equivalent Transfer Value to move your funds elsewhere. This is where the International Private Pension Plan, or 40EE comes into play.
Due to the fact that the Overseas pension scheme is out of the UK’s jurisdiction, and no tax-relief has been received on contributions, there won’t be an option to transfer this to an International SIPP (a UK registered scheme), as the assets were built up under different rules.
To remedy this situation, the 40EE plan or International Private Pension Plan can be used.
What is a section 40ee?
A section 40ee scheme is a plan specifically created to allow a tax-efficient transfer and draw-down of an Overseas pension scheme, and one that is usually based in Guernsey under Guernsey trust law.
A 40ee offers members the following benefits:
- ability to consolidate and save pension benefits with an internationally recognised pensions vehicle
- no limit on transfer levels, or ongoing contributions
- no cap on benefits
- no investment restrictions and greater fund management
- no Guernsey Tax payable on contributions, growth or benefits
There are various rules with which the trustee must abide by in order to ensure the 40ee continues to offer these benefits. As such, the trustee will list ‘scheme rules’, explaining their procedures and how the trust will be set up for your new plan. Note, these transfer are an incredibly complex area of financial planning, and it’s always best to seek independent and regulated financial advice before considering your options and transferring any retirement account.