Update on QROPS and SIPPS

1st February 2018

The Author: Craig Gardner
Craig works in the Madrid office as a Financial Planner and is responsible for helping clients make better financial decisions.

The introduction of the ‘Overseas Transfer Charge’ (OTC) by the UK Chancellor in 2017 decreased the popularity of QROPS for many expats who decided instead to transfer into International SIPPS. However, this doesn’t mean that QROPS should be written off as a viable pension solution for expats.

There are three primary reasons why QROPS may still be the right solution:
  1. If you have a Scheme valued over £1m and are looking to capitalise on Lifetime Allowance (LTA) planning opportunities.
  2. You want access to 100% of the Scheme value as death benefits when a Member satisfies Non-UK residency of ten or more tax years at the date of death; this is irrespective of age.
  3. Should you wish to remove all personal/wealth assets out of the UK for personal/emotional reasons.
If these circumstances don’t apply, then you might be better suited to an International SIPP.
In 2017, the International SIPP, in comparison to the QROPS, saw an extension of the UK Member Payment provisions from five to ten years.  For a Non-UK resident, a SIPP can be more advantageous for many reasons, especially where the Member intends to return to the UK to draw retirement benefits.
The advantages of an International SIPP include:
  • Lower core fees;
  • Lifetime Allowance (LTA) not referenced at transfer as BCE8* only refers to QROPS transfers from a UK registered pension scheme;
  • If a transfer is received from a UK registered scheme it is not an overseas transfer and can, therefore , transfer with no Overseas Transfer Charge (OTC) consequences for non-EEA based clients;
  • Quicker transfers via the Origo Transfer System for Defined Contribution transfers and a simpler process than for Defined Benefit (DB) transfers;
  • FSCS** and FCA*** regulations cover SIPP schemes, giving added peace of mind;
  • FCA ‘standard assets regime’ means that most funds currently used by international advisers can still be used in a SIPP portfolio;
  • 25% Pension Commencement Lump Sum (PCLS) available via a SIPP can be the same as a QROPS, i.e. within five years of transfer or where the QROPS Member has not been UK resident for ten or more years at that date;
  • Flexibility to take PCLS entitlement over a longer period than the twelve month limit in a Malta QROPS;
  • Wider UK Double Taxation Treaties (DTT) (compared to Malta) means that via an ‘NT’ PAYE tax code a Member can receive gross income in retirement and pay tax locally where a valid UK DTT exists with the country of residence;
  • Even where no DTT exists, the £11,500 UK personal allowance can still be claimed;
  • Easy to consolidate legacy or old style schemes, that only pay income by way of annuity, into the SIPP for access to a flexible benefits regime, including Uncrystallised Pension Fund Lump Sum (UPFLS) that is not available via QROPS;
  • 100% death benefits available in the SIPP where the death of a Member occurs before age 75 (if a Member dies after age 75 the income tax liability for a nominated beneficiary might be offset where a valid DTT exists).
If you would like to know more about International Pension Transfers, download our free guide here. It covers not only QROPS and International SIPPs, but includes QNUPS and International Bonds.
Momentum offers its market-leading Momentum International SIPP, available to Non-UK residents and if you’d like to discuss this with one of our expert advisers, please contact us.
Paul Forman Partner Profile UAG
*A Benefit Crystallisation Event (BCE) that occurs when a member transfers benefits to a QROPS before age 75.

** Financial Services Compensation Scheme

*** Financial Conduct Authority