The international SIPP or Self Invested Personal Pension. Is it really a viable alternative to QROPS overseas pensions?
If you have a UK pension and you're resident in Spain, one of your options is to transfer to an international SIPP. So, what are they and why would you consider doing this?
SIPP pensions first appeared in the UK in the late 80'S as a savings vehicle where the member could have more influence and control over a much wider range of investments than offered by many existing pension providers. The international version of the SIPP, as oppose to a QROPS overseas scheme, is still a UK cited and regulated pension but its structured specifically for residents of countries outside the United Kingdom, including Spain.
SO which types of pension can and cannot, be transferred to an international SIPP, if you have left or are planning to leave the UK. In the main, you can transfer from most private or company pensions. You can also consider transferring from a defined benefit or final salary scheme, as long as you're not already taking any benefits. However, you cannot transfer your state pension. Also, you cannot transfer out of many public sector schemes such as the NHS, Police, MOD, teachers and some, but not all, government pensions. And finally, if you've bought an annuity - you can't transfer from this arrangement either.
So, why would you move from your existing pension to an international SIPP? The main reason is flexibility. Following the introduction of pension freedoms in 2015, many people were looking forward to their retirement with this new flexible way of accessing their pension pots. The legislation allowed scheme members in theory to take what they want when they wanted whilst being mindful of the tax implications of course. As part of this arrangement many UK pension providers had to create new schemes which would allow for these freedoms, with the seemingly straight forward solution that when you reached aged 55 you could simply swap to their flexible scheme. However, now that we have left the EU, many of these pension providers are refusing to allow non UK residents to switch to their flexible schemes. Instead they prefer to encourage either a poor value annuity purchase or to transfer to an international scheme if the member wants the UK style flexibility.
So step forward the international SIPP. With a transfer into this solution you have full flexibility and you can be sure you are in a pension plan made specifically for non UK residents.
Another advantage is that with an international SIPP you can avail yourself of qualified and regulated guidance in Spain. We are professional advisers, living and working in here with expert knowledge of both the local and UK systems. Now, if you currently have a UK IFA, it's highly unlikely that they will be able to passport their advice services to you from 2021 onwards. We, of course, have all the requisite EU licenses and permissions in place. Furthermore, its a requirement in EU law that that the firm giving you investment advice on your pension has permission under something called the Mifid 2 directive. If they do not there could be an extra layer of cost to you, as they would have to outsource this area of advice to another firm.
Finally, as ever, a word of caution. Always be aware of potential pension scams. Do not give your personal details to anyone before verifying who they are, that they are a qualified adviser and work for a properly regulated company with permission to give advice in Spain. Avoid cold callers, anyone who says you can release your pension before age 55 and promises high returns from exotic sounding investments. In our view the international SIPP is an excellent alternative to a QROPS in the right circumstances. If you would like to hear more about QROPS pensions, please click on this link. And if you would like to know which option would suit you the most, please do get in touch.
Patrick Macdonald ASCI
International Financial Adviser
Living and advising in Spain for 14 years