The International SIPP | 5 Reasons to Transfer
LEARNING OBJECTIVES
At The Wealth Genesis, we’re passionate about empowering our clients with the knowledge and information to succesfully navigate life abroad.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
The key features of an International SIPP
How UK pensions work for Expats
Reasons to transfer to an International SIPP
The best providers available
How much a transfer should cost
Red-flags to look out for when taking advice
What is an International SIPP?
The International SIPP is simply a UK-based, FCA regulated pension scheme specifically designed for British Expats abroad. This means that for non-UK residents, the International SIPP will provide certain benefits that traditional UK pensions cannot.
Below, we cover the 5 most important reasons to consider a transfer:
01 Full-flexible access draw-down
This means you can access your money on your own terms, whether it's occasional lump sum payments or regular monthly income.
02 Investment management and control
This allows you to match your pension to your attitude to risk. Typically, as you get closer to drawing an income, your portfolio's risk profile should include more cautious investments.
03 Portability
The International SIPP can follow you to any country in the world, and there's no need to make any further transfers. It can also pay income to any bank account in the world, providing the account is in your name.
04 Multi-currency options
This allows you to invest and hold your pension in all major currencies, which can protect against potential currency risk. This is particularly relevant for Expats, given day-to-day living costs will be in foreign currency.
05 Tax-efficiency
With the International SIPP, you have the choice how you take money from your pension, which can often result in greater tax efficiency. You can also apply for an NT code on your account, meaning no UK tax will be deducted at source.
Most traditional UK pension providers will no longer offer the above benefits to non-UK residents.
At the time of writing, pension providers such as Aviva, Aegon, Standard Life, Phoenix Life, Transact and Fidelity may no longer allow non-UK residents to have full flexibility on their pensions.
As such, British Expats may wish to transfer their UK pension to regain control and flexibility of their retirement funds.
Should I Transfer my UK Pension Abroad?
If your UK pension provider states any of the following, you should think about moving your pension to an International SIPP.
We can only pay your pension out as a lump sum.
This will likely trigger a huge tax liability in your country of residence. In most European countries, this income will be taxed at your highest marginal rate of tax.
We can only pay your 25% PCLS, then you must purchase an annuity from us.
The 25% PCLS payment is tax-free in the UK. It is not necessarily tax-free in other countries. Furthermore, annuity rates are very unattractive currently.
We cannot allow you to continue to manage your pension investments.
You or your financial adviser needs to be able to manage the investments of your pension in line with your attitude to risk. Not being able to make changes to your pension account can have a serious impact on your retirement funds.
We cannot facilitate multi-currency investments.
Living abroad means accepting a degree of currency risk. However, we always advise clients to hedge or mitigate this risk by holding some assets in their local currency. For example, if the value of the Pound Sterling crashes, what effect will that have on your retirement in a European country?
The above are all compelling factors to consider transferring your UK pensions to an International SIPP.
Note, whilst 'International SIPP' sounds like a pension outside of the UK, it isn't.
All International SIPPs are HMRC approved pension schemes which must be regulated by the Financial Conduct Authority.
Your money does not leave the UK when transferring to this type of Expat pension.
Novia Global SIPP | Still The Best International SIPP?
Novia Global currently offers the lowest cost SIPP on the market.
There are many providers available (PSG, STM, Trireme etc.), but currently the Novia offering is the best.
You can learn more about the Novia Global SIPP in our unbiased, comprehensive product review here.
How is my UK pension Taxed Abroad?
Very simply, your UK pension or International SIPP will be taxed as income at your marginal rate of tax.
Make sure you apply for a Nil-Tax Code (NT Code) to stop your pension being taxed twice and having to claim tax back off HMRC - this can take several months.
How Much Does it Cost to Transfer my Pension Abroad?
Pension transfer costs vary wildly depending on which financial adviser you work with. The majority of expat financial advisers will charge anywhere between 5% and 1% for the initial pension transfer (based on the pension value) and an annual management fee of 1% per annum.
The Wealth Genesis is the first adviser to charge a flat-fee to all our clients, irrespective of the complexity, size or circumstances of the transfer.
Our flat-fee ensures zero conflicts of interests in our advice.
We also charge an industry leading 0.85% annual management fee, which covers the ongoing maintenance of your retirement funds, as well as investment reviews, tax assistance and cash-flow modelling.
Expat Pension Transfer | Red Flags
Before working with a financial adviser, be sure to conduct thorough due-diligence on the individual and firm you wish to work with. Be sure to ask the following questions:
Who are you regulated by?
Are you fully independent?
How much does the transfer cost?
Is someone paying you to sell this product?
Are there any lock-in periods or exit penalties?
How will you look after the account on an ongoing basis?
One of the most common issues in the international financial advice space is commissions.
If you cannot see clearly what the charges are, this means commissions are being paid to the adviser to sell you a product.
If the adviser tells you there are exit penalties or early withdrawal charges, this also means large commissions are being paid.
Make sure to check the companies credentials on a regulatory body's website, as well as requesting the adviser's qualifications.
By taking the above steps, you can avoid proceeding with an adviser who isn't working in your best interests.
Our Verdict | International SIPPs
If you're UK pension provider is capable of offering you all of the benefits that are available with an ISIPP, and you comfortable managing your own pension investments, then you do not need to consider transferring your UK pensions.
If they can't offer the above, then it would be wise to consider your options. Take your time, do comprehensive research on advisers and providers, and speak with different companies to assess the suitability of a working relationship.
Working with an expat adviser should be a long-term relationship - so, be sure not to rush.
To learn more how we can help, contact us using the form below.
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FAQs
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Yes, they have exactly the same protection as a traditional UK pension scheme.
Legally, they are all FCA regulated and fully covered by the Financial Services Compensation Scheme. -
An International SIPP will likely be slightly more expensive than a UK pension.
However, the benefits will typically over-weigh the increase in running costs. -
The average advice fees range from 5% to 1%, which can be a substantial sum for larger pension transfers.
We charge the same one off flat-fee of £3,000 to all our clients, regardless of the size of the transfer. -
Most International SIPPs will require you to work with a regulated financial adviser to execute the transfer.
Pensions are highly regulated, and can be complicated, so we encourage Expats to take advice before proceeding.
