I have written a number of articles on SIPPs, pension changes and updates, SIPPs platforms and SIPPs vs QROPs differences and will link to various articles at the end.
In this article want to go over International SIPP as it is one of the most frequent questions I get emailed and how it differs from standard SIPPs and why recently the FCA has been cracking down on international SIPPs providers.
Why the FCA is looking into these is mainly because of the fees associated with offshore bonds and it not being transparent (I have linked a table below to the bond fees so that you don’t get caught out by anyone providing these bonds). I have done a full breakdown in other blogs about the fees of offshore bonds and platforms costs with SIPPs comparison and also compared both the U.K and offshore platforms
What is an internaitonal SIPPs?
It is effectually the same as a normal SIPPs and the International is more a name for marketing purposes, but an “International SIPPs” allows people with a U.K pension that are now living abroad and a tax resident outside the U.K, to invest in platforms that accept a non-U.K address.
Most platform providers within the U.K will need a U.K address. If you have an existing account it might restrict what options are open to you as some do not allow trading if you have moved abroad and is best to check with your provider.
As far as withdrawal goes it is the same as a U.K SIPP. As I get asked frequently it does not allow early withdrawal the rules are the same the location is just different.
What are the differences between a SIPP and international SIPP?
- You have to have wrapped in a trust
- You have currency options
- The tax on income will depend on the country where you are residing when you withdraw the pension
- Fund options normally have a wider range of European, U.S funds in Euros and USD.
- The platforms are based outside the U.K, normally in the Isle of Man.
How do I manage an international SIPP?
Like a U.K SIPP, it allows you more freedom of what you can invest into, this can be done via your online account or by an IFA.
Each provider will have a slightly different account and unique systems and processes but they are all very much similar.
When might it be useful to have an international SIPP?
I can’t comment on individual circumstances, so please seek professional help for individual circumstances.
Normally, it is used by expats that are living abroad for an extended period of time that have defined contribution pension or company pensions which they want more control over.
Either wanting to combine the pensions for compounded growth or just have more investment control. Basically, the same reason you would transfer to a SIPPs if you are in the U.K.
QROPs or SIPPs, I have done a blog detailing all the differences on this, in short, it won’t be applicable if you are outside the EEA, Australia, Nez Zealand and any other area on the list see updated list below.
https://www.gov.uk/guidance/check-the-recognised-overseas-pension-schemes-notification-list
If you do not live in the area where QROPs is registered or not in one of the listed schemes you will have to pay a 25% tax charge on the value of the QROPs. Also, if you are planning to go back to the U.K or potentially might go back to the U.K QROPs it would not be valid as it essentially becomes a SIPPs with higher fees if you go back to the U.K and certain QROPs jurisdictions have certain requirements for the amount of time you have left the U.K.
So for most people, that might be thinking about going back to the U.K, an International SIPPs is a better option.
When might it not be useful to transfer to a SIPPs?
Again, please seek professional help for specific advice. However, if you have a defined benefit pension then the FCA has taken the stance that it is not suitable to transfer out. If you are looking/thinking you will need to get an independent report as well as solicit an IFA.
Make sure you fully understand the costs and the risks associated before making any transaction.
If you already have a SIPPs provider in the U.K that can keep open when you are abroad with little restrictions and intend on moving back to the U.K in the future then it might be better to keep your original account.
U.K platforms can be cheaper than offshore with the cheapest flat fee of 19.99 GBP* a month while international SIPPs cost around 0.5%*+. So, if you are planning on going back to the U.K. and have a platform that is low cost and happy with the performance you would have no reason to transfer your pension.
Costs do vary significantly between platforms so please check the costs with the individual platforms.
FCA on interational SIPPs
The FCA is looking into the fees of SIPPs and more so the offshore bonds as it is believed that the fees of these are high and would be in the best interest for clients to leave their pension(s) in the current scheme.
I have written about in a number of articles that the bonds can charge high fees of 3%+ a year and have been a high number of compliments to the FCA on these not being disclosed prior. Also, the tax efficiency that the bonds are being sold by is not applicable to U.K pensions.
If you are looking for International SIPPs stick to a platform base model.
The concerns have resulted in a set of orders to SIPP providers from the FCA:
- Any business accepted must be in the client’s best interest
- Operators must robustly manage their products
- Fee disclosures must include all charges within the pension, including any relating to a bond and any other underlying investments
- Providers must carry out adequate due diligence on advisers introducing customers and investments held in their international SIPPS
- Operators should ‘appropriately manage’ any conflicts of interest
Here is a list of the offshore bond platforms that should be clear of all the charges before you invest (note that the charges are not for pensions as they are capt at 5% upfront coms)
Offshore bond and platforms
| Bond Name | Fees Annual based on a 10-year plan | Dealing Charges | Establishment Charge | Surrender Charge | Upfront charges (what you pay on day one) | Admin Charge USD | Verdict | Personal Rating (5 stars) |
| Friends Providence International Reserve Bond | 1.5-2% | No | Yes | Yes | Yes 8% | 126 | A good brand name but with high fees | 2.7 |
| Friends Providence International Summit Bond | 1.6% | No | Yes | Yes | Yes 6-7% | 126 | High fees lack of liquidity | 1.9 |
| Friends Providence Zenith | 1.6% (add this uses mirror funds as well that can add 1.2% a year in chargers) | No | Yes | Yes | Yes 5-7% | 126 | Uses mirror funds would not be inclined personally to use this | 0.5 |
| Generali World Wide choice option | 1.5%-3% varying on advisors coms | Yes | Yes | Yes | Yes 5-7.5% | Included in the fees | Reputable company but fees really do eat up on this uses in Singapore mainly. | 0.7 |
| Investors Trust Assess portfolio plus bond | 1% | No | Yes | Yes | Yes 3-5% | 90 USD | Not a big name as other bond options but a cheaper option also has ETFs in the funds | 3.9 |
| Investors Trust Fixed Income | 7 USD | No (Hard to deal out as fixed term deposit ) | Yes | Yes | Yes | No | Low risk a higher interest fixed deposit rate from 1.5-3.6% | 3.3 |
| Old Mutual Collective Investment bond | 1-2.5% | Yes | Yes | Yes | 3-7% | No | A good company with moderate charges in the medium charges | 3.1 |
| Old Mutual Exclusive Bond | 1.5%-2.5% | Yes | Yes | Yes | 3-7% | 15 GBP | A respectable bond charges but as with them all a high cost that adds up if not used right. Mirror funds are also used. | 2.8 |
| Prudential Bond | 1-2% | Yes | Yes | Yes | 5% | 1% | With funds charges of 1%-1.5% this adds up. | 2.3 |
| RL360 PIMS | 1.6%-2.1% | Yes (first 10 free) | Yes | Yes | 5% | 0.2% | Popular choice for advisors expensive cheaper and better options are available for most personal | 2.2 |
International SIPPs FAQs
Are International SIPPs subject to U.K rules?
Yes, they are, ‘international’ is just for marketing, the difference is slim between them and they are still subject to the same rules.
Can I just take out a U.K SIPPs?
You can if the platforms accept you but very few platforms will accept you these days if you didn’t have a SIPPs prior to leaving the U.K. Most platforms will want a UK address and this forces many expats to look for an international option.
What are the tax benefits?
There are none. When you drawdown you will be subject to the rules in accordance with where you are a tax residence. If you are in a place of low-tax it will be according to those rules. If you are in the UK, you will be taxed at the UK rate, it wholly depends on where you are a resident at the time.
