I have written this article for U.K expats or personnel that worked in the U.K now living overseas about the options of moving a U.K pension into SIPPs or QROPs. Firstly, before we go on let’s talk about, what is a QROPs and SIPPs.
Qualified Reconciled Pension Scheme
A scheme that was brought out in 2006 as part of the freedom pension act and was designed to allow individuals permanently living overseas to simplify their affairs and enable them to continue to save and provide an income for retirement by transferring their UK pensions to a pension based in their new country of residence.
The government provides tax relief on contributions made to the UK registered pension schemes, and investments made within those schemes are generally free from income tax and capital gains tax.
If a transfer is made from the UK registered pension scheme to a Qrops then, until recently, it has been free of tax. (I will go over more the changes that have come into place with QROPs further on)
The recognized overseas pension scheme must become a Qrops as defined by the regulations. That is, the scheme will operate the overseas transfer charge and undertake to comply with the information requirements as prescribed by HMRC.
SIPPs – Self Invested Pension
SIPPs are a type of pension for people happy to make their own investment decisions. Below we will answer some frequently asked questions by expats
Is It Worth Me Putting My Pension in a SIPPs?
I am not going to comment, on individual pensions. But personally, am a big fan of pension freedoms in theory.
If you are U.K expat or still in the U.K the option to have pension investments is what you are controlling, seems a win to me, however, each person has individual circumstances. However, let’s look at why, well look at other developed countries U.S 401k gives you a chance to roll it over into an IRA and invest as you choose your investment.
Australian Supers, get an average 5% and give you more flexibility in the pension over the investment.
While the U.K pension system for me seems very stable, for most pensions plans. The returns are mitigated at best and are not done for individual circumstances. So, therefore, having more freedom, in theory, is a good option and can give you higher returns than what most schemes are getting by investing in low-interest-rate bonds.
The U.K SIPPs platforms are low cost, such as Vanguard 0.25% a year, and set portfolios for a novice investor with Nutmeg that has made Sipps your pension somewhat easier. The one downside with Nutmeg is that it is a portfolio based on your risk profile and not personal circumstances, however, is very seamless to use.
Why Should I SIPPs My Pension
Well again I can’t comment on individual cases but sometimes some pension schemes come with cheap share buys in the company or a set number of shares or perks such as discounts on products if you stay in the company pension. To get the most personal answer to your circumstances, it is worth speaking to an advisor and they will be able to help you. An advisor does need to know as much detail as possible in order to help you the most.
With final salary pensions again, this depends on what scheme it is and how much is offered to get out and your situation. A lot of things need to be taken into consideration such as time frame, objectives, amounts, fees & where you currently are. I would highly recommend seeing a few advisors if you have one of these. But remember they are gold plated and rarely used anymore for a reason. In fact, the law now states that you have to see an advisor if your pension is worth more than 30,000 GBP. This stops people from investing in wrong products and fads where they could have the rug pulled from underneath them.
When Is The Best Time To SIPPs My Pension?
Again it depends on your situation but I have seen a few companies such as Royal Mail & British Steel go into administration, if the pension scheme you are in is under threat I would see an advisor if you are considering to move.
I don’t think there is a perfect time, I believe it to be similar to trying to perfectly time the markets, I think staying up to date with the knowledge and if you want to look at regaining control of your pension and controlling your portfolio to suit your individual needs, then it is a good time to ask some questions.
What Are The Drawbacks of a SIPPs
Well, employers don’t have to contribute to your SIPPs and they likely won’t. Also, they may not let you SIPPs the pension if you are still working with the present company.
Benefit of SIPPs
Well the average by a study of Americans by LinkedIn, changes jobs 10 times before the age of 40 and only 3% by a survey by the balance careers found that only 3% stay in jobs, this means a lot of different pension schemes if you don’t manage them well. SIPPs give you the ability, to have one stable pension that you can contribute through the duration of your working life and is portable to wherever you are living currently. For example, you can be working in Singapore and still pay into your SIPPs.
If I Am Living Overseas Is a SIPPS In The U.K Or International SIPPs a Better Option?
Structurally, they work the same but have a few differences in regards to platforms and flexibility.
SIPPs in the U.K as seen below do have some lower fees than offshore but can have more tax implications. You need to consider the level of advice if you are getting advice from an advisor both in the U.K and offshore. I have written some articles that include this. You can have greater investment options offshore, and have the use of different currencies that may be more desirable if you are living overseas. They do have the same tax rules where income must be declared by HMRC. With the trustees also needing to report member payments. Read these articles for more information on these subjects:
When Can You Draw Your SIPPs & How Much?
With both international and U.K SIPPs, the age is 55 and you can withdraw 25% tax free lump sum at this age. There are also limits, of tax relief for the first 5 years of withdrawing the SIPPs for expats. Also, the Life Time Allowance (LTA) limit of 2020 at 1.055 million GBP is also taxed at 55% on funds over this amount.
If you live in a country with a double taxation agreement with the U.K then it will be subject to U.K growth.
What Happens If My SIPPs Was Lower Than The Life Time Allowance Then The Funds Grow It Higher Than The Life Time Allowance?
Yes, it will be subject to the tax. I recently had a client call up about this (March 2020) as the growth had gone over the LTA limit and would it be taxed the extra 55% on anything over as wanting to withdraw soon. I replied yes it would but the markets seem to have taken care of that problem for you currently.
What Happens If I Die?
Unlike, a normal pension with SIPPs you can add a beneficiary to your pension, whether that be your partner or children. Adding a beneficiary is big plus.
How Much Do I Need To Transfer To A SIPPs?
Offshore you will need 20,000 from all your pension schemes to move offshore.
What Are The SIPPs Options In The U.K?
Hargreaves Lansdown
Charges 0.45% of anything under £250,000 and anything over it has 0.25% going to 0.1% for anything over half a million and no charge on anything over 1 million. This has a wide funds selection is voted one of the top SIPPs providers
Nutmeg
It helps you invest in one of its select portfolios so you don’t have to choose. Fees 0.75% for anything under £100,000 and 0.35% on anything over £100,000.
AJ Bell
It has the lowest fee of 0.25% of anything less than £100,000 0.10% on anything over. Any amount of over 1 million is free. Good fund option nationwide service.
Vanguard
Charges 0.15% a year what is capped at £375 a year it also has no exit charges. The lowest cost provider.
Investor interactive
This is for those with £60,000+ and wants little or no changes to the portfolio, it comes with a few options ranging from £9.99 to £19.99.
Is It Worth Seeing a Financial Advisor To SIPPs My Pension Or Can I Do It?
For a non-defined benefit pension worth under 30,000 GBP and an all defined contribution pension. Is it worth it? They can be, I can give you an example of someone who had a British coal pension and moved it into a scheme that would give him a monthly income before it collapsed and this saved him near half a million pounds. We recommend speaking to advisors so that you can see what they recommend for you and plus if you are unsure about the platforms, market, the differences in investments and taxes, it will be worth it because of the knowledge you come out with.
On the other hand, sadly I have known many that have lost hard-earned money due to bad advice so it’s worth seeing a few qualified advisors and shopping around to see if they are all on the same lines of investments for your situation.
Helpful Tips
- Don’t just look at the fees, many do shop around for the cheapest but this isn’t always the best when it comes to your future security. Would you rather pay slightly more now than risk losing money in your pension?
- Make sure they have experience in pension transfers, simply ask them outright
- They have a good reputation in dealing with situations that are similar to yours
- They have a good standing, they are not going to go bust and where they are putting your hard-earned money isn’t going to go bust.
QROPS
What & Who Is a QROPS For?
Qrops was designed to give flexibility if you are a U.K pension holder living overseas.
What Pension Scheme Does It Need To Meet To Be Allowed You To Transfer a QROPS?
- The scheme must be a pension scheme;
- The pension scheme must be an overseas pension scheme;
- The overseas pension scheme must be a recognised overseas pension scheme
What Locations Allow QROPS?
I will list where the options to QROPS are depending on where you live (see appendix) but as of 2017, only a few countries will allow QROPS. Mainly EU, India, Australia, New Zealand.
What Are the Benefits of QROPS?
- Tax efficiency, where it is subject to the local rate of tax which is usually a lot lower than in the U.K.
- They can also mitigate Inheritance and income tax.
- If you have a pension over the nill band rate of 325,000 GBP ITA tax it would be feasible from an inheritance benefit standpoint to review your options as can be passed on by death tax-free.
- If your pension passes the LTA, 1,055 million GBP, it will not be taxed if moved into a recognized scheme, nor if the fund’s growth goes over the LTA.
- You can change into a currency of choice (major currency) for example Euro, USD, AUD.
- You don’t have to purchase an annuity.
- You have the option of consolidation of your QROPS, if for example, you have multiple schemes, you have the ability to combine the schemes into one scheme which makes it easier to maintain.
- You have the ability, to take a larger lump sum, presently the tax-free lump sum stands at 25% at the age of 55, with the QROPs scheme it has the ability to take out when hit 55.
Can Final Salary Schemes Be Transferred Out into QROPs
Yes. But make sure you get a full report before taking it out on the options as it might not be in your best interest to always transfer it out of the final salary scheme.
Can I Take All My Fund Out At Age 55?
Yes you can take all of the funds out but will be subject to the local tax laws that are minimal (see table below for set locations)
What Kind Of Pensions Can & Can’t Be Transferred?
- You can transfer a final salary pension
- Company pensions can be transferred
- You can’t transfer, state pension, or insurance annuity.
What Are The Tax Rules of QROPS?
As of Spring 2017, it has a 25% tax charge on certain locations. Please see a financial advisor and see if this applies to you or refer to the table below.
Levels Of Income Needed To Transfer To QROPS?
Usually, transfer schemes require 50,000 GBP to be transferred for the trustees to accept, see table below about the trust requirements.
Does The Scheme Have Any Obligation & Is It Authorised?
All QROPs schemes are authorised, for a list to see the link U.K Government pension scheme is in the appendix, also it has to be reported to the scheme for at 10 years since the scheme was moved to ensure that it is still compliant.
What Is The Process of Moving It To a QROPs?
First, you will need to see an advisor. Once you have seen an advisor and consider the benefits of moving offshore, if decided to go ahead, you will then need to write to your UK scheme administrator or provider and inform them of your intention to transfer your pension fund to a QROPS.
The administrator then has 30 days to confirm the value and the details they require for the transfer to proceed. You then have 60 days to provide all the information required. If you fail to do this in the time allocated the UK scheme administrator is obliged to take a 25% overseas transfer charge from the fund value if the transfer proceeds.
As a scheme member the details you will be expected to provide include:
- Personal details (including current or most recent UK address)
- The date your UK residence ended if you’ve already left
- Details of QROPS including HMRC reference number (if known)
- Country/territory where QROPS is domiciled
- Once this it will be placed in a Trust (see trust prices below) and then put in a fund platform then invested.
What Are The Fees?
See a list of the trust fees below, but also the platform fees offshore are normally 1.5-3% and an advisor fee of 1% so can be as high as 5%. Be careful of this and 5% entrance fee for the advisor.
What Jurisdictions Can I Move My QROPs To?
- If you are moving to Europe, you can transfer your pension to a regulated European QROPS in Malta.
- If you are moving to Australia, you can transfer your pension to a regulated Australian QROPS.
- If you are moving to New Zealand, you can transfer your pension to a regulated QROPS in New Zealand.
- If you are moving to India, you can transfer your pension to a regulated QROPS in India.
- If you are a resident anywhere else in the world, you will face a 25% exit tax if you move your UK pension scheme to a QROPS. In this case, the only other option to explore would be to set up a SIPP
What Are The Best Locations & Where To Use?
What is the best depends on entirely your situation and where you are based for a full list please see the U.K Governments list of Qrops providers.
QROPS in India, Australia, New Zealand, Malta and Gibraltar, Isle of Man and Gurnsey QROPS tend to be more widely used.
There are some different rates on PCLS that you can take on locations,
| U.K. Scheme | 25% + full flex access drawdown |
| Malta | 25%+ full flexi access drawdown or 30% + annual income |
| Gibraltar | 30% +150% GAD rates |
| Isle of Man | 25% +150% GAD rate |
| QROPs Jurisdiction | U.K | Malta | Isle of Man |
| Flexi Access | Yes | Yes | No |
| Age Allowed to access | 55 | 55 | 55 |
| Maximum age to take Benefits | 75 | 70 | 75 |
| Pension Commencement Lump Sum | 25% | 25%/30% after10 years non U.K resident | 25%/30% after 5 years non U.K resident |
| Annual Retirement Income | Any | Any | 150% GAD rates higher after 5 years |
| Annual Contribution limit | 40,000 GBP | No limit | No limit |
| LTA limit | 1 million GBP | No Limit | No Limit |
| Income tax at source | Up to 45% | Up to 35% | 20% |
To draw down the 30% you need to be offshore for 5 years and currently a non U.K resident.
Taxation on QROPs For The Individual Scheme
IOM QROPS: There is no personal allowance since 2010 in IoM for non-residents. QROPS income would be subject to a 20% tax rate on the full amount. However, this can be paid out tax-free at source for countries which have a Double Taxation Agreement with the Isle of Man, currently, that is Australia, Bahrain, Belgium, Estonia, Ireland, Malta, Norway, Poland, Qatar, Slovenia, UK.
There is a 7.5% tax upon death for an IOM QROPS whilst in drawdown.
NZ QROPS: There are no taxes on an NZ QROPS in New Zealand.
Malta QROPS: there is no tax on growth or death; income taxes are between 15% and 35%; but, if you are in one of the 70 countries which have a Double Taxation Agreement with Malta, the tax could be reduced to zero at source in Malta, although you would have to pay income tax in the country you live in at retirement.
Gibraltar QROPS: there is a flat rate of tax of 2.5% on a Gibraltar QROPS.
If you move your pension out of the UK tax net into a QROPS, you no longer need to pay UK taxes or worry about future tax changes in the UK. Only if you return to live in the UK, would your QROPS be taxed in the UK.
If I Die, What Are The Tax Benefits?
The table below shows the tax benefits with the different QROPs schemes
The table will illustrate what the tax implementation are when upon death on different locations and ages.
| Time When died | UK | Isle of Man | Gibraltar |
| Before Retirement | 100% of the Fund | 100% of the Fund | 100% of Fund |
| Retirement before 75 | Fund- 55% Tax | Fund- 7.5% tax | 100% of Fund |
| Retirement After 75 | Fund- 55% Tax | Fund-7.5% tax | 100% of Fund |
The UK pension rules as of April 6th, 2014, meaning that upon death, there is a 45% tax charge if your spouse decides to take a lump sum.
https://www.gov.uk/guidance/check-the-recognised-overseas-pension-schemes-notification-list
What Can You Withdraw From Your Pension If You QROPs It?
| Gibraltar | IOM | Malta | U.K. | |
| Before 75 | 0-150% U.K GAD rates | 0-150% U.K GAD rates | 0-150% U.K GAD rates | 0-150% U.K GAD rates |
| After 75 | 35-120% GAD | 35-120% GAD | Flexi drawdown | 35-90% GAD |
GAD is the Government Actuarial Department. They work out the pension you are allowed to withdraw based on 15 year UK FTSE Gilts. A typical drawdown might be around 4% – 6% per year of your pension pot which would increase as you get older.
What Are The Disadvantages Of QROPs?
- Making a transfer from a UK pension to a QROPs could incur a 25% tax charge
- The potential risk of HMRC withdrawing their recognition of the QROPs your funds are in at any time in the future
- Benefits of the QROPs may not match those provided by your UK pension Advisors fees and charges levied by the provider could be high and reduce the value of your transfer fund.
- Investments can go down as well as up.
- The platforms can be high
- A lot of mis-sold QROPs that haven’t performed
- Where you might be living may not have the safe financial advisor qualification or regulations in the U.K,
What Are The Best Offshore Platforms For My QROPs?
Refer to offshore investment guide below:
What Should I Do If I Have a QROPs & It Hasn’t Performed?
Well, review the ongoing charges, any fees and funds and their performance and speak to me on info@investmentsforexpats.com as many mentioned before to have high charges.
QROPs itself is not a bad scheme and was designed with pension freedom, but itself doesn’t drive the growth, it is the funds so should review your funds and platform that you are using
Appendix Trust Companies As Of 2020 That Accepts QROPs
Boal & Co | Gibraltar QROPS | Malta QROPS | Isle of Man QROPS
- Full Scheme for pension values over £100,000
- Set Up Fee: £300
- Annual Fee: £495
- Lite Scheme for pension values up to £100,000
- Set Up Fee: £625
- Annual Fee: £845
Bourse | Gibraltar QROPS | Malta QROPS
- Full Scheme for pension values over £100,000
- Set Up Fee: £650
- Annual Fee: £900
- Lite Scheme for pension values up to £100,000
- Set Up Fee: £350
- Annual Fee: £650
Elmo International Retirement Plan| Malta QROPS
- Full Scheme for pension values over £100,000
- Set Up Fee: £895
- Annual Fee: £895
- Lite Scheme for pension values up to £100,000
- Set Up Fee: £595
- Annual Fee: £545
Harbor Pensions | Gibraltar QROPS | Malta QROPS
- *now part of STM Group PLC
- Set Up Fee: £845
- Annual Fee: £845
Horizon Pensions | Gibraltar QROPS
- Set Up Fee: £995
- Annual Fee: £995
ITC Personal Retirement Scheme | Malta QROPS
- Set Up Fee: £895
- Annual Fee: £895
ITC Occupational Retirement Scheme | Malta QROPS
- Set up Fee: €1250
- Annual Fee: 0.5% AUM with €1250 minimum
IVCM | Gibraltar QROPS
- Full Scheme for pension values over £100,000
- Set Up Fee: £599
- Annual Fee: £799
- Lite Scheme for pension values up to £100,000
- Set Up Fee: £295
- Annual Fee: £370
MC Trustees | Malta QROPS
- Set Up Fee: €756
- Annual Fee: €1,023
Momentum | Gibraltar QROPS | Malta QROPS | Isle of Man QROPS
- Full Scheme for pension values over £100,000
- Set Up Fee: £645
- Annual Fee: £895
- Lite Scheme for pension values up to £100,000
- Set Up Fee: £300
- Annual Fee: £525
Sovereign Aegean Retirement Benefits Scheme | Isle of Man QROPS
- Full Scheme for pension values over £100,000
- Set Up Fee: £750
- Annual Fee: £900
- Lite Scheme for pension values up to £100,000
- Set Up Fee: £300
- Annual Fee: £500
Sovereign Calpe Retirement Benefits Scheme | Gibraltar QROPS
- Full Scheme for pension values over £100,000
- Set Up Fee: £750
- Annual Fee: £900
- Lite Scheme for pension values up to £100,000
- Set Up Fee: £300
- Annual Fee: £500
Sovereign Centauras Benefit Scheme | Malta QROPS
- Full Scheme for pension values over £100,000
- Set Up Fee: €800
- Annual Fee: €1,100
- Lite Scheme for pension values up to £100,000
- Set Up Fee: €400
- Annual Fee: €600
Sovereign Kemmuna Retirement Benefit Scheme | Malta QROPS
- Full Scheme for pension values over £100,000
- Set Up Fee: £750
- Annual Fee: £900
- Lite Scheme for pension values up to £100,000
- Set Up Fee: £300
- Annual Fee: £500
STM Gibraltar QROPS
- Single or Divorced
- Set Up Fee: Nil
- Annual Fee: £790
- Married
- Set Up Fee: Nil
- Annual Fee: £530
STM Malta QROPS
- Single or Divorced
- Set Up Fee: Nil
- Annual Fee: £790
- Married
- Set Up Fee: Nil
- Annual Fee: £530
QROPS by location Appendix
- Africa, Asia, Latin America, USA, Canada, Switzerland, rest of world – Transfer your UK pension to an International SIPP
- Australia – Transfer your UK pension to a QROPS in Australia
- Austria – Transfer your UK pension to a QROPS in Malta
- Belgium – Transfer your UK pension to a QROPS in Malta
- Bulgaria – Transfer your UK pension to a QROPS in Malta
- China – Transfer your UK pension to an International SIPP
- Croatia – Transfer your UK pension to a QROPS in Malta
- Cyprus – Transfer your UK pension to a QROPS in Malta
- Czech Republic – Transfer your UK pension to a QROPS in Malta
- Denmark – Transfer your UK pension to a QROPS in Malta
- Estonia – Transfer your UK pension to a QROPS in Malta
- Finland – Transfer your UK pension to a QROPS in Malta
- France – Transfer your UK pension to a QROPS in Malta
- Germany – Transfer your UK pension to a QROPS in Malta
- Gibraltar – – Transfer your UK pension to a QROPS in Gibraltar
- Greece – Transfer your UK pension to a QROPS in Malta
- Hong Kong – Transfer your UK pension to an International SIPP
- Hungary – Transfer your UK pension to a QROPS in Malta
- India – Transfer your UK pension to a QROPS in India
- Ireland – Transfer your UK pension to a QROPS in Malta
- Isle of Man – Transfer your UK pension to a QROPS in the Isle of Man
- Italy – Transfer your UK pension to a QROPS in Malta
- Japan – Transfer your UK pension to an International SIPP
- Jersey – Transfer your UK pension to a QROPS in Jersey
- Latvia – Transfer your UK pension to a QROPS in Malta
- Lithuania – Transfer your UK pension to a QROPS in Malta
- Luxembourg – Transfer your UK pension to a QROPS in Malta
- Malaysia – Transfer your UK pension to an International SIPP
- Malta – Transfer your UK pension to a QROPS in Malta
- Netherlands – Transfer your UK pension to a QROPS in Malta
- Poland – Transfer your UK pension to a QROPS in Malta
- Philippines – Transfer your UK pension to an International SIPP
- Portugal – Transfer your UK pension to a QROPS in Malta
- Romania – Transfer your UK pension to a QROPS in Malta
- Singapore – Transfer your UK pension to an International SIPP
- Slovakia – Transfer your UK pension to a QROPS in Malta
- Slovenia – Transfer your UK pension to a QROPS in Malta
- Spain – Transfer your UK pension to a QROPS in Malta
- Sweden – Transfer your UK pension to a QROPS in Malta
- Switzerland – Transfer your UK pension to an International SIPP
- Taiwan – Transfer your UK pension to an International SIPP
- Thailand – Transfer your UK pension to an International SIPP
- UK – Transfer your UK pension to a SIPP
- USA – Transfer your UK pension to an International SIPP
If you have any questions at all about your pensions, then please email me at info@investmentsforexpats.com and I can respond or call you.
