SIPP
WHAT IS SELF INVESTED PERSONAL PENSION? (SIPP)
A SIPP is a pension “wrapper” designed to hold investments until you retire and begin drawing an income. It operates similarly to a standard personal pension but offers greater flexibility in choosing investments. Unlike standard personal pension schemes, where your investments are managed within a chosen pooled fund, a SIPP allows you to select and manage your assets. However, due to the complexity, most people opt for an authorised investment manager to make these decisions.
ESSENTIAL DETAILS OF A SIPP
- UK-Based: A SIPP is based in the UK and regulated by UK law, regardless of where you live
- Availability: You can invest in a SIPP no matter where you reside
- Retirement Benefits: Under current legislation, you can start drawing benefits from age 55, even if still employed
- Flexible Withdrawals: You can draw as much or as little income as you like, with the option to stop and start withdrawals at any time
- Tax-Free Lump Sum: Up to 25% of your funds can be withdrawn as a tax-free lump sum
- Transferable: If needed, you can later transfer your funds into a QROPS
- Tax Efficiency: SIPP investments grow free of capital gains tax and income tax
- Retirement Locations: SIPPs are beneficial for those planning to retire in the UK or in countries with a favourable double-taxation agreement with the UK
WHAT CAN YOU INVEST IN WITHIN YOUR SIPP?
- Quoted UK and overseas stocks and shares
- Unlisted shares
- Collective investments (such as OEICs and unit trusts)
- Investment trusts
- Gilts
- Exchange traded funds (ETFs)
- Property and land (excluding most residential property)
- Insurance bonds
- Some SIPPs can also raise a mortgage against commercial property, with rent contributing to loan repayment and property running costs
CONSIDERATIONS FOR EXPATS USING SIPPS
- Non-UK Residency: You do not need to live in the UK to invest in a SIPP Multi-currency SIPPs are available, which can help mitigate currency fluctuations
- UK Pension Rules: SIPPs adhere to UK pension rules and are subject to any changes made by the UK Government
- Taxation: You will be subject to UK income tax when drawing an income from your SIPP, and potentially also subject to tax in your country of residence.Understanding local tax rules and those in the UK is crucial for making informed decisions about drawing an income
- Advisers: Many expats consult financial advisers for retirement planning. If seeking advice from a UK-based adviser, ensure they understand the specific opportunities and considerations for expats
LEAVING YOUR UK PENSION IN THE UK
Now that you’ve relocated from the UK, explore the options for your pension assets left behind.
You have three choices:
- Leave the pension funds in the UK and take no action
- Transfer to an HMRC-recognised overseas pension fund (QROPS) for greater flexibility
- Transfer to an International or UK-based SIPP (Self Invested Personal Pension) to manage your investments more actively
WHAT MAY APPLY IF YOU LEAVE YOUR PENSION IN THE UK
- Your beneficiaries may not receive the full value of your fund after your death
- UK pension legislation and tax rules are subject to ongoing changes, which could affect your retirement plans
- Funds held in GBP may be subject to currency risks over time
- Limited control over investment choices and growth potential
- Restricted growth options, typically only inflation-linked
WHAT’S RIGHT FOR YOU?
Deciding between a QROPS or International SIPP depends on your unique circumstances and country of residence. Understanding your options and potential benefits is crucial.
Are you worried about how much your retirement funds will be passed to your beneficiaries?
Do you simply need to understand the current position regarding your pension assets?
Here are a few things to consider:
- Evaluate your tax position as an expatriate
- Address concerns about passing retirement funds to your beneficiaries
- Seek clarity on the current status and potential growth of your pension assets
These are examples of questions that we will be able to help assist with to help meet your financial goals, however for answers to more complex questions and personalised advice, we advise consulting with a qualified UK financial adviser, to make informed decisions that align with your retirement aspirations and financial goals.
