If you’re considering moving overseas, it’s important to think about the financial side of things, including what you’ll do with your pensions. You’ll need to be able to access your savings to fund your lifestyle in your later years, but you might face certain hurdles if you move abroad.
Fortunately, a self-invested personal pension (SIPP) could help you here. This specific type of pension can be used to help you manage and access your retirement savings overseas.
If you’ve never heard of a SIPP before, or you’re not quite sure how they work, our guide to SIPPs and moving overseas will tell you everything you need to know.
This first instalment gives some more details about what a SIPP is.
Read on to learn more.
A SIPP is a type of personal pension that gives you control over your investments
Before looking at what a SIPP is, it’s useful to know about the two main types of pensions – defined benefit (DB) and defined contribution (DC).
A DB pension, sometimes called a “final salary” pension, pays a set income for the rest of your life when you retire. These are less common now than they used to be.
A DC pension, on the other hand, gives you a pot that you contribute to, and invest your savings, with the goal of growing them over time. Once you retire, you can start drawing as much as you like from the savings pot.
Crucially, unlike a DB pension, you won’t necessarily get an income for the rest of your life. Once you’ve spent the money in your DC pension, that’s it.
A SIPP can be set up by yourself. You can pay in over the years to build your savings and choose how you invest your money.
SIPPs typically offer you a wider range of investments to choose from, and you have full control over how your savings are invested.
There are several important differences between SIPPs and other types of pensions
If you’re employed in the UK, you probably pay into a workplace pension. There are some important differences between these pension schemes and a SIPP.
First, when you’re paying into a workplace pension, your employer also contributes. Under the auto-enrolment rules, the minimum contribution is 8%, with 5% coming from you and 3% from your employer.
When you pay into a SIPP, on the other hand, it’s a personal pension and you won’t necessarily get anything from your employer on top. You are free to ask your employer to pay into your SIPP instead of your workplace pension, but they don’t have to agree to this.
The other main difference is in the choice of investments you can access. Your workplace pension provider will normally have a selection of different funds you can choose from, based on your goals and attitude to risk.
This won’t be anywhere near to the choice that you get with a SIPP. You can build a tailored portfolio with a range of different investments including:
- Cash
- Shares*
- Exchange traded funds where authorised or recognised by the FCA*
- Units in Regulated Collective Investment Schemes (defined as Collective Investment Schemes authorised in the UK, or alternatively where constituted outside of the UK are recognised by the FCA as shown on the FCA Collective Investment Scheme Register)
- Exchange traded commodities*
- Shares in investment trusts*
- Real estate investment trusts (REITs)*
*these must be traded on a regulated venue which refers to stock exchanges, multilateral trading facilities (MTF) or other trading venues, authorised by a financial regulator or a governmental agency either in the EEA or in a third country
This allows you to have more control over how you want to invest your retirement savings.
Another key difference between your workplace pension and a SIPP is that you often have more flexibility when it comes to accessing your savings from overseas.
A lot of workplace pension schemes won’t pay an income into a bank account outside the UK, for example. Certain SIPPs, on the other hand, allow you to access your savings from anywhere.
That’s one of the main reasons why SIPPs can be so useful if you’re planning to move overseas.
You can contribute to your SIPP regularly and transfer in existing pensions
You can make contributions to a SIPP as and when you choose. You might set up a regular monthly contribution or you can pay in a lump sum if you have the money available.
Also, you can transfer existing pensions into your SIPP, which could be especially useful if you’re planning to move to another country. If you have a workplace pension that you can’t easily access from abroad, moving it into a SIPP could give you more control over your savings.
Savings in a SIPP are usually accessible from age 55
When you’re planning your retirement, it’s important to think about when you’ll be able to access all your pension savings.
Normally, you can start drawing from a SIPP – and other personal pensions – from the normal minimum pension age of 55 (rising to 57 from 6 April 2028).
This rule applies whether you live in the UK or move to another country.
In some cases, there might be a special arrangement that allows you to access your savings before you’re 55. This might apply if you are seriously ill, for example.
A SIPP could benefit you if you want to retire overseas
If you’re thinking about retiring abroad, moving your pension savings into a SIPP could be a suitable option for you. The potential benefits include:
- More control over how your wealth is invested
- Payments to bank accounts overseas
- Payments in multiple currencies
- Lower fees than alternative pension options.
The next instalment of our guide to SIPPs and moving overseas will explore these benefits in more detail.
Get in touch
We can help you move your pension savings into a SIPP if you’re moving overseas.
You can email us at [email protected] or call 03303 202091 for more information.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pension Regulator.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.
