Common concerns regarding iSIPP
When we have intensive conversations with our clients regarding the issue of International Self-Invested Personal Pension Schemes, or simply iSIPPs, we get a range of concerns.
The first and primary question is, “What is a Self-Invested Personal Pensions SIPP?, and what is an international SIPP? What are the differences between schemes in terms of benefit and regulation? Is it also appropriate for our client? What happens if I reside somewhere other than the United Kingdom?”
Let us now go down those questions step by step.
Difference Between an International SIPP & UK SIPP
To begin, an international SIPP has the same structure as a SIPP but has specific features designed for Non-UK residents. It is regulated by the FCA and must work following the same strict SIPP investment UK regulations. A Self-Invested Personal Pension Plan is a tax-advantaged investment designed to consolidate your UK pension schemes from wherever you reside to access greater flexibility and control over your pension pot before and during retirement. Tax-advantaged investment simply means a reduction in taxes on the retirement planning that is approved by Her Majesty Revenue and Customs (HMRC).
An International SIPP is the most tax-efficient investment strategy for consolidating your UK pensions as a US Resident. On our website, we present an in-depth review of the issue of SIPP and International SIPP.
SIPP & International SIPP at Cameron James
People would have said that an international SIPP is considerably more expensive five or ten years ago. So I’m not intending to use one. That may have been accurate for the average setup charges for an international SIPP; however, some providers now charge three or four hundred pounds for setup and 500 pounds each year on an ongoing basis.
For our clients in the UK, we generally engage AJ Bell and Fidelity at UK SIPP and for an international SIPP provider, we presently use Novia Global; they’re the lowest cost provider in the market and they’re highly transparent.
At the time of writing, we deal with Novia Global as an international SIPP provider. The price is reasonable. There is no startup charge and the annual fee is 180 pounds.
Most SIPPs in the UK will cost you around £100 per year, so the competition has driven prices down significantly. As a result, the argument against using an international SIPP is no longer valid.
Advantages of International SIPP
The UK pension system is taxed on an EET (Exempt, Exempt Taxed) basis. The contribution paid to any type of pension is tax-free, as is the growth of the investment made within the pension fund. In addition, the pension fund benefit will be considered taxable income.
This tax benefit is one of the most significant advantages for our clients in Europe, the United States, and many other countries of residents. Regardless of where they live, our client may expect the full benefit of a UK SIPP. So, if you’re looking for a more in-depth review, feel free to visit our International SIPP page.
Standard UK retirement benefits often provide a limited pre-packaged selection of investment alternatives for UK residents. Not only are UK pension plans frequently limited, but they are also frequently costly and offer poor value for money.
International SIPPs offer a wider range of investments including stock exchange-listed investment trusts, commercial property, gilts and bonds, stocks and shares, investment trusts, Financial Conduct Authority-recognised Open-Ended Investment Companies (OEICs), bank deposit accounts, exchange-traded funds (ETFs), and real estate investment trusts.
Another significant benefit that an international SIPP offers that the UK cannot physically accomplish as part of the policy is that an international SIPP allows you to invest your money in multiple currencies. So, as some of you may have guessed, if you live in Europe and plan to retire there, or if you live in the United States, your retirement needs will be in a different currency than your pension.
One important advantage of International SIPPs that UK SIPPs do not have is the ability to hold your money in other currencies to prevent GBP currency depreciation. You have the option of keeping your money in GBP if the value of GBP is more advantageous and converting it to any currency if the value of GBP is less profitable.
If you have a UK SIPP, it must remain in GBP; however, if you have an international SIPP, you may be able to shift it into your country’s currency. It is not necessary to change currency while using an International SIPP. Many of our clients do not change currency; they retain it in GBP. However, we watch the situation and, if the GBP is significantly undervalued versus another major currency, we may consider moving the capital.
Should I use International SIPP or QROPS?
Another common issue we hear is whether to choose a Qualifying Recognised Overseas Pension Schemes QROPS or an International SIPP. A QROPS qualified recognized overseas pension scheme is theoretically an alternative to an international SIPP.
When you are a resident of the EU, International SIPPs perform similarly to QROPS. However, the difference may be identified in the cost solution and the lifetime allowance (LTA). An international SIPP has a simpler cost solution than a QROPS.
Generally speaking, each client scenario is unique. We would recommend this type of solution for our client who is a resident of Europe and intends to stay for five years or more. And at the time of writing, our client has a pension pot that is approaching their lifetime allowance of 1.073 million.
As such, you have an international SIPP and a QROPS, both of which do the same thing. If you wanted to invest in a Vanguard passive life equity fund, for example, you could do so through the international SIPP and the QROPS.
The only difference is the cost of the solution. As previously stated, an international SIPP is a far easier alternative, costing zero pounds to set up and 180 pounds annually.
QROPS, on the other hand, will generally cost you approximately 950 annually on an ongoing basis, with a setup charge of around seven to eight hundred pounds for values higher than about half a million. So many of our clients would question us, “Well, why would I ever spend so much money on a QROPS when I can just use an international SIPP?” The major answer, of course, is a lifetime allowance.
If you are approaching your lifetime allowance of 1.073 million and transfer to a QROPS, you will trigger your BCE 8 event, benefit crystallization event 8, which means you will be tested for your lifetime allowance on the day you transfer to your QROPS.
To illustrate, if you have a million pounds in your UK pension pots and transfer to a QROPS, you will be tested and will not have to pay tax liability on any further rise in your QROPS beyond one million pounds.
So, if you have a million pounds and it grows at a rate of ten percent per year for ten years, your pension would be worth two million dollars. If you keep it in an international SIPP or your UK schemes, your pension fund would be worth £2 million, and you’d be subject to a £ 250,000-lifetime allowance tax from the UK government. However, under your QROPS, the two million pounds would be yours to distribute to your beneficiaries as a UK tax-free.
We believe that in the majority of the cases, an international SIPP is the best choice for our clients because it is the least expensive and is appropriate for anyone with less than one million pounds. If you have more than one million or are close to one million, we would always look into a QROPS for you.
It is critical to note that QROPS has been in use since 2006. There have been several cases of poor advice with QROPS during that period. This was because QROPS might be regulated in a variety of unusual and strange places of the world.
Since then, the UK government suddenly realized they’d opened Pandora’s box with QROPS, and they began pulling out all of these laws, leaving just a few crucial nations such as Malta.
Consideration Before Choose International SIPP or QROPS
The advice you receive within a QROPS does not always imply that it will be terrible, and the advice you receive within a SIPP does not always imply that it will be beneficial. What you must ensure is that your financial adviser is providing you with excellent advice that is appropriate for your risk profile.
Transferring your pension and choosing the best pension plan to meet your needs is not an easy decision. You should seek the advice of a skilled financial advisor with extensive expertise and a proven track record. With this advice, you can ensure that your pension plan performs admirably.
If you want to transfer your UK pension plan into an international SIPP, whether it is a DB pension scheme or a DC pension scheme. You will complete the advising process with a qualified financial advisor who will recommend the best International SIPP solution and portfolio allocation for you.
If the defined benefit UK pension transfers value exceeds £30,000, the FCA must approve the transfer.
The International SIPP transfer procedure is transparent. We will analyze your profile, and your adviser will then offer you a clear and complete overview of your current position as well as the investments that are most suited to your needs.
Cameron James – Expat Financial Planning
Cameron James is the preferred independent financial advisor for International SIPP transfers. With over 10 years of experience in transferring pensions, Cameron James is now servicing clients in 26 countries.
We have the qualifications and technical knowledge required to help you transfer to international SIPP both as an expat and US resident. Our mission is to bring regulated and transparent advice to our clients. So our clients fully know how much their advice will cost in advance with no hidden fees.
CJ has a sophisticated cash flow management system in place. Our senior management team has a decade of expertise serving expats and is committed to continuing to serve the requirements of expats for decades to come.
If you have any questions about the Self-Invested Personal Pension or the International Self-Invested Personal Pension, please contact us through our website and leave a message. You may also schedule a straight one-on-one appointment by using the calendar link provided below. We will analyze your situation and work with you to determine what is best for you.