QROPS or SIPP – The Burning Expat Pension Question

799

QROPS or SIPP - The Burning Expat Pension QuestionA recurring question for British expats who want to make retirement savings with a pension is whether to opt for a SiPP or a QROPS.

A SiPP is a self-invested pension plan, while a QROPS is a qualifying recognised overseas pension scheme.

Most financial advisers will talk about the pros and cons of each scheme, but the bottom line is what really counts is tax residence.

Tax residence is the term that describes the place where you live and pay tax.

As an expat, you can live in Britain and pay tax here while working overseas.

Tax residence decides pension status

But the true meaning of the term ‘expat’ is not the definition of someone who has just left the UK on an extended stay, but someone who has left the country permanently to settle somewhere else.

Deciding tax residence can be tricky – hence a stack of court cases and tax tribunals to try and decide the finer points.

However, all this dilutes down not to how many days someone stays in or out of Britain in a tax year, but to whether they have truly broken their ties and moved on.

To demonstrate this, an expat would need to show they no longer have a home in the UK waiting for them when they pop back for visits, that they have no bank account or driving licence and that their main life is based somewhere else.

This does not answer the SiPP v QROPS question.

However, once tax residence is decided, the expat has their pension strategy rolling out in front of them like a carpet.

Debunking a QROPS myth

A temporary expat have home thoughts from abroad is probably better off with a SiPP. The main advantage is the tax break on pension contributions at their highest marginal rate of tax.

QROPS do not qualify for this tax break because the expat has to be a British taxpayer to meet the rules, and as a British resident taxpayer cannot take out a QROPS, the question never arises.

Similarly, a SiPP is no good to permanent expats because they lose one of the main advantages – the tax break – because they live overseas.

Another myth about QROPS is that many schemes are pension liberation or unlocking scams that help under 55s access their pension cash early.

However, recent fraud warnings about these schemes from the Financial Conduct Authority, which regulates pension firms and advisors, The Pension Regulator and HM Revenue and Customs, all point at British onshore pensions and not QROPS.

4 COMMENTS

  1. I wish to get better access to my uk pension by transferring to a qrops however living in the United States this as been impossible I seem to be going round in circles the value of my pension is 23000 can you please advice me as to what if any options are open to me thanks

    • Hi Steven,

      Assuming you are talking sterling, a transfer value of £23,000 in most cases would not be worthwhile transferring to a QROPS. Simply because the cost of managing the QROPS will outweigh the benefits:

      Typically you are looking at paying around £415 per annum to run a QROPS, additionally the start-up cost is around £350.

      Assuming you retire at age 60 and live until age 80, you would have spent £8300 in QROPS management fees. A QROPS is a fantastic solution for a tax efficient retirement but it is certainly not for everyone.Taking the above into consideration, if you would still like to discuss further please feel free to contact me.

      Kind Regards,

      Louie Hamood

  2. Dear Sirs,

    I am a 67 year old male, I live in Brazil, I am retired, I sold my house in England about a year ago, I have took my Lump Sum from my pension fund when I was 55-56 and have been taking a maximum draw down from my SIPP to date. I have invested in commercial property here in Brazil and have also built a new home here. I moved to Brazil in 2007

    I have at present a SIPP pension fund, which includes commercial property owned by the SIPP. I am currently in the process of selling the commercial property and all should be completed before April 6th 2015. The value of the property will be in the region of £350 – 400K which when sold will be transferred to my SIPP.

    My question is this, with the new tax legislation coming into force on the 6th April 2015, will it still be advisable to change the Sipp to a QROPS. I still have a bank account in England where my SIPP draw down is deposited together with my state pension. this is then transferred to my bank account here in Brazil as and when I require. I think I would qualify as a permanent resident of Brazil as I have remarried a Brazilian National.

    I would appreciate a reply to my email address as shown if possible because this is the first time I have found a site that may give me the information I require.

    Regards

    Paul.

  3. Dear Sirs,

    I am a 64 year old male, living in Brazil, am semi retired,(no work here in Brazil but by phone & computer in financial sector, type of stockbroking) I rent out my home in England £1500 pm
    .I am married to a Brazilian ( have permanent resident status) and own a home here i purchased prior to our move here in early October 2014

    I have at present 5 ppp with different people, total value about £250,000 plus get my state pension next Jan 14th when I am 65 plus a defered annunity (currently in a bond) paying almost £12,000pa

    My question is it be advisable for me to take out or switch to a QROPS. I still have a bank account in England where my rental income is deposited, together with a small pension £475.00 pm (final salary from a previous period of employment) and where my state pension.which I hope to get will also be deposited.

    I transfer money on an ad hoc basis, from my UK bank account to my wife’s Brazilian bank account here in Brazil as and when I required for utility bills etc but pay a lot of .day to day living on UK credit cards. As yet I haven’t opened a Brazilian Banck a/c here

    I would appreciate a reply to my email address as shown trusting you can advise or help me or point me in the right direction

    Regards

    Nick

Leave a Reply