It is not a surprise that, once you move abroad and are already in retirement, or planning to retire, there are going to be certain financial circumstances you need to consider for yourself. If you have a pension in the UK and have now left the UK or are planning to leave in the future, you may be thinking about ways of gaining more control over the money in your pension.
Just because you’ve left the UK, it doesn’t mean you have to leave your money in the same pension plan as there may be another plan that is more suited to your needs and may benefit your more. This is why a SIPP might be the right answer for you and your future pension plans.
A Self Invested Personal Pension (SIPP) is, simply put, a UK pension channel for allowing investors to control their investment strategy, as well as their retirement, all by themselves. It offers a great deal of control to the individual and does not rely on trustees to make decisions for them. The term expat SIPP is often used to describe a UK pension for expats, who are usually non UK residents living abroad. It is designed for people that want to have more control over their money and pension scheme.
SIPPs are UK-based pension schemes, they are regulated from within the UK and subject to Financial Conduct Authority (FCA) compliance in terms of financial selling regulations assuming, of course, that your advisor is UK based.
A transfer pension to SIPP is ideal for those who contain a larger UK pension amount and who are seeking an increased investment flexibility including currencies. It is also suitable for those who are temporarily, but not permanently non-resident expatriates (expats), or for those who think they are quite likely to return to the UK and live there in the future.
The good news about making a transfer pension to SIPP, is that all your investments in this plan will grow free of income tax and capital gains tax. And for every £800 you save, the government will give you tax relief, which can boost your savings by £200, which can lead to a total of £1000 contribution.
These are some of the reasons why many people choose to transfer their pension to a SIPP. However, we have researched and come up with the top three reasons why people transfer pension to SIPP. Read more about it below.
1. Control over your money
This is generally the main reason why many people choose to transfer their pensions to a SIPP (Self Invested Personal Pension). As the name suggests, you (“self”) are in control of the management of your pension.
You are able to make contributions with your own money, through a regular savings plan or a lump. You can include your employer contributions and transfer your funds from an already existing pension. What is also worth noting is that others can contribute money on your behalf, including employer as well as family members, into your SIPP if required. This means that you have the ability to appoint where and how much of your money is being added to your SIPP at any given time.
The full control of your SIPP also means it is not controlled by an old employer that you left years ago and it is not under the control of an old insurance company. You are completely in the driving seat of your pension.
Whilst you’re not responsible for the administration of the SIPP, as this must be done by an FCA regulated company that has the necessary permission to ‘operate’ pension schemes, you get to decide how it's invested and how you take the money from your pension.
2. Investment choice
A SIPP allows you to invest your pension in a much wider range of investments. You are not restricted by an insurance company’s fund list or a small range of funds offered by your old employer. You will be given the ability to earn returns according to your level of investment risk. A SIPP pension also gives you the benefits of great flexibility and control over your investments.
HMRC rules allow a SIPP to invest in:
- Mutual Funds such as Unit Trusts and OEICs
- Exchange Traded Funds (ETFs)
- Investment Trusts
- Direct Shares in the UK and overseas
- Direct Corporate and Government Bonds
Typically a SIPP will hold an investment account on a platform so you can easily buy and sell investments and track their performance all in one place.
As you are choosing and dealing with the many investment options provided, you will be accumulating your retirement fund on the side before your retirement even begins. This is important as you will have collected a wide range of stocks, commercial property, shares and government bonds to help you grow your fund as big as possible. This is why the earlier you start, the bigger return you will receive. However, researching investments carefully and understanding how to make the most of your money are important first steps to take.
When making investment choices, your financial goals, moral values, attitude to risk and costs should all come into play when making these vital decisions. We also highly recommend that you frequently review your investments and their performance as it is essential to keep track. As you’re the goals and priorities you firstly anticipate are bound to change over time, you may wish to change your investment choices, along with your strategy, especially when you approach your retirement stage.
3. Flexible withdrawals
Thanks to the ‘pension freedoms’ that were introduced in April 2015, it is possible to have much greater control over how you withdraw the money from your pension.
A SIPP is able to take advantage of the new ‘flexi-access drawdown rules’ meaning you’re no longer restricted by any limits on how much you can withdraw from your pension and there’s no requirement to purchase an annuity.
Not all pension plans are able to offer withdrawals using the new flexi-access drawdown rules, which is the case for most old insurance company pension schemes that usually only offer you the option of buying an annuity. The good news is that you can transfer these pensions to a SIPP to take advantage of flexi-access withdrawals.
From age 55 onwards, you can take 25% of your pension tax free, although this doesn’t have to be taken all at once, it can be paid in instalments as and when required.
You have the option of keeping your pension invested whilst taking withdrawals and will be able to set up regular withdrawals or just take ad-hoc lump sums, or a combination of the two.
The remaining 75% that isn’t tax free is treated as income and therefore subject to tax in the UK. If you’re resident overseas, you may be able to use a double tax treaty to ensure you are not taxed twice on this income.
Once you transfer pension to SIPP, drawing regular income whilst staying invested is also allowed. You can see it as a type of monthly salary for when you have retired. Though, the money is drawn from your crystallised fund and will be treated as income and therefore subject to tax. You will also be able to decide how often you receive the chosen monthly payments and can usually be set up to pay you a regular income on a monthly, quarterly or annual basis.
Most of the UK's double tax treaties state that you will only be taxed on the income by the tax authority in your country of residence and not the UK.
SIPP holders can begin taking benefits at any time from age 55 (rising to age 57 from 2028). Any residual fund can be passed to your beneficiaries’ tax free on your demise up to the age of 75. After that time, they will pay tax at their marginal rate of income tax.
Why transfer your pension to MyExpatSIPP
SIPPS can be a very attractive home for existing pensions that are unwillingly tied in other schemes. Transfer pension into SIPP can be ideal for you if you have multiple pensions across several employers over the years. It is likely that you would want all your pensions to be brought together in one place, in that way you will be able to reduce fees and give access to better investment opportunities.
Our service has been designed for non-UK residents and expats to enable you to stay in control of your pension once you leave the UK.
We know the implications of moving overseas and tailor our service to the needs of non-UK residents. It will feel like you never left and the complications you think you will face are non-existent. MyExpatSIPP was created with people like you in mind, to keep your pension relations easy, safe and beneficial for you and your future.
The SIPP even allows you to hold investments in different currencies. This may make sense for someone living in the US to have their SIPP investments in US Dollars, or someone living in Spain to have their SIPP investments in Euros.
A transfer pension to SIPP with us means that even though you are based abroad, for example in America, Europe, or somewhere further afield - you will be able to receive the same benefits as the UK residents, just through an international standpoint. We are a company that offers a pension plan that is regulated by the Financial Conduct Authority in the UK, so that your UK pension benefits are managed accordingly. Where you have your main home will determine the tax treatment of contributions and withdrawals into the pension scheme.
MyExpatSIPP provides you with:
- An easy to use online SIPP account to manage your pension
- A wide investment choice of over 5,000 ETFs, Unit Trusts, OEICs and direct Stocks
- 5-star rated customer service from our expert Account Managers
- Assistance claiming double taxation relief on withdrawals using tax treaties
We have carefully thought through everything, in order to make this as straight forward for your as possible. Our simple and transparent fees mean there's no hidden commission or ongoing adviser fees. It only takes a few minutes to open a SIPP account online and we will handle the transfer of your pension to ensure it goes as smoothly as possible with minimal fuss.
Get in touch if you have any questions about transferring to our SIPP.