UK Pension Changes for Expats
The UK Government has recently published “The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021. This outlines the UK Pension Changes for Expats and UK residents. The key objective is to protect pension members from scams and the misselling of investment products. They take immediate effect as of the 30th November 2021.
UK Pension Changes for Expats – What does it mean for me?
In order to transfer your personal (DC/SIPP) or Occupational (Defined Benefit Pension) pension, you must satisfy specific criteria prior to leaving your existing scheme. If the criteria are not met, you will lose your statutory right to transfer out of your existing UK pension scheme. In essence, your existing scheme can refuse your request to transfer out to a new pension arrangement.
MoneyHelper (the guidance service provided by the Money and Pensions Service)
If you are wanting to transfer your pension to a ROPS (Recognised Overseas Pension Scheme) and you are not a tax resident in the same country as the scheme, this will become an Amber Flag event. In this circumstance, you will be referred to MoneyHelper. MoneyHelper is the guidance service provided by the Money and Pensions Service.
The other factors that create an Amber Flag event and result in a referral to MoneyHelper are:
- Unregulated or High Risk investments are included in the scheme
- Overseas investments are included in the receiving scheme
- Receiving scheme fees are high or unclear
International SIPP or ROPS? What are my Options?
If you are an expat and want to transfer your UK pension, you have two options. You can transfer to an International SIPP. A UK SIPP that is specifically created for non-UK residents. Or, a ROPS, They are registered in locations such as Malta, Gibraltar and Jersey. As mentioned above, if however you are not tax resident in the same country as the ROPS it will become an Amber Flag event.
Depending on which type of scheme you transfer to plays an important role in the treatment from your existing trustee. Below we have assessed an International SIPP against the guidelines above, for what creates an Amber Flag Event,
The International SIPP, based on utilising an FCA regulated platform within the SIPP, does not create an Amber Flag event for the following reasons:
- UK registered pension scheme (not overseas)
- FCA regulated – No high-Risk or unregulated investments
- Full disclosure on adviser fees required with no commission payments or opaque charging structures
ROPS: All transfer requests to a ROPS where you are not a tax resident in the same country will create an Amber Flag event.
There are of course times when a ROPS could be the most suitable solution, mainly if you are nearing your LTA limit. Furthermore, when utilised with an FCA regulated platform to mitigate high risk, commission-based, unregulated investments, a ROPS can be a very effective pension planning tool. However, as it is now the decision of your existing trustee as to whether you can transfer out or not, nothing is guaranteed.
UK Pension Changes for Expats – Final Thoughts
At Harrison Brook, we always support initiatives that bring greater protection to pension members against potential scams. Allowing ceding schemes the ability to refuse transfers does to some extent offer this. However, there are definitely still areas of the regulations that require greater explanation. As such, we envisage the completion of pension transfers to take considerably longer than before.