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Understanding your international pension benefits can be difficult at the best of times and legislative changes can create opportunities as well as threats to your existing pensions.
A SIPP is a UK based private pension with added functionality, transparency and flexibility. As a UK based plan, it is subject to all the benefits and drawbacks of UK legislation that will continue to meet your needs whether you are a UK resident or live overseas.
A QROPs is an international pension plan recognised by HMRC and authorised to accept transfers of pension funds from UK plans, it only needs to report to HMRC for its first 10 years nor is it subject to continuing UK pensions legislation so it can adapt to your changing circumstances and tax regimes.
We recognise the dangers of generic advice and your future is personal and individual to you, it’s not one size fits all and there will be reasons why one option will be more suitable for you and we can explain in detail why, and the implications of both in your specific situation.
Download our SIPPS and QROPS guide to learn more.
The Risks and Rewards of SIPPs and QROPS
Planning for a Comfortable Financial Future Overseas
Choosing the right pension transfer product provides a lifetime of benefits that echo down to your beneficiaries with all the advantages of flexible, tax-efficient succession planning.
Conversely, the wrong pension product can attract substantial taxes, leaving a worrying gap in your provision for retirement that may profoundly impact your financial security.
Therefore, if you are deciding between a SIPPs and QROPS transfer, expert financial advice is highly advisable to ensure you know all the ins and outs of this crucial judgment.
Here at Chase Buchanan, we take a truly individual approach to pensions advice, so before making any recommendations about the best transfer option for you, we offer a professional consultation with one of our expert advisers to identify:
- What pension products you own, where, and to what value.
- When you wish to retire, and in which country.
- Your current tax position and residency status.
- Your financial situation and income requirements.
As we’ve mentioned, one pension transfer solution will be optimal for one expatriate, providing a comfortable cushion of financial security for years to come.
However, that same transfer may attract heavy tax levies and ongoing deductions for another, so a bespoke analysis is crucial to assess the most suitable option.
One of the biggest challenges in pension transfers is that regulations change rapidly and often.
The Chase Buchanan teams internationally provide up to date advice in light of all the rules, disclosures and taxes likely to impact your pension transfer decision.
Understanding UK legislation alone does not paint the whole picture:
- Every country has varying rules about pension transfer taxes, pension income taxes, and wealth taxes.
- Overseas Transfer Charges depend on the location of your existing pension, where you are transferring it to, and your residency position.
- The Lifetime Allowance is a crucial aspect, and so it may be beneficial to source alternative investments if there is a tax benefit in doing so.
- HMRC updates the list of approved QROPS schemes frequently, so a pension product available last week might not be today.
It may be that transferring your pension is not the most attractive solution, and so there isn’t a finite number of ways to utilise UK pension savings to provide for your future abroad!
Support from a professional financial adviser is the best way to ensure you have complete oversight of all the advantages and pitfalls of every transfer or reinvestment option, including anticipated tax exposures and projected returns.
Expert Guidance in Choosing Between SIPPs and QROPS Pension Products
Understanding your goals and evaluating your pension before a transfer is vital.
Some schemes have valuable benefits that are lost if you transfer, including higher tax-free lump sum withdrawals, guaranteed annuity rates or additional death benefits for your heirs.
In many cases, sacrificing a Defined Benefit scheme comes with a crucial need to evaluate the returns available elsewhere and whether any tax liabilities associated with a transfer will mitigate the final total value of the fund.
So much depends on what you wish to achieve, whether you are retired, where you live, and whether you remain a UK tax resident or have full residency status overseas.
And, if a pension transfer is the most practical solution, the next challenge is to compare available schemes and decide which product aligns with your expectations with the most beneficial investment options!
There are numerous overseas pension schemes, plus the option of a UK-based SIPP, which provides a significant amount of flexibility to invest your pension fund, diversify, and control your level of risk exposure as you approach retirement.
Defining Your Ideal Pension Transfer Product
As we’ve seen, the decision of a SIPPs or QROPS transfer – or another solution entirely – is a complex one, dependent on a wide range of factors.
Chase Buchanan strongly recommends seeking expert financial advice from our teams of expat specialists, with local teams throughout Europe, the USA, Canada, and our UK Administration Centre.
Maintaining a UK pension from overseas remains a possibility. A transfer offshore commands a thorough analysis from an experienced financial adviser with sufficient knowledge to provide bespoke advice on this challenging topic.
For more information about the benefits and risks of the two primary pension transfer options explored here, please download our complimentary Guide to SIPPs v QROPs.
Alternatively, get in touch with your nearest Chase Buchanan team at your convenience, and we’ll schedule a time to discuss your retirement finances and how to structure a thorough assessment to guide the way forward.
Ask a Question
A Qualifying Recognised Overseas Pension is an international pension plan recognised by the HMRC. While it is recognised and authorised to accept transfers of pension funds from UK plans, it only needs to report to the HMRC for its first 10 years and it is not subject to continuing UK pensions legislation. It can adapt to your changing circumstances and can also benefit from local taxation.
Feel free to ask a question below or download your free guide here.