Standard SIPP vs International SIPP | What’s The Difference?
LEARNING OBJECTIVES
We’re passionate about providing free, high quality and up-to-date information to Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
What a UK SIPP is and how it works
The differences between a normal SIPP and an International version
The benefits for Expats using the International pension
Best practise for non-UK residents
Retiring abroad can come with various challenges. A key concern for the modern Expat is understanding what to do with your UK pensions.
With so much contrasting information and advice publicly available online, understanding your options can quickly become a headache.
In this article, we'll focus on the International Self Invested Personal Pension and explain how it differs slightly from a typical UK SIPP account and other overseas pension schemes.
What is a UK SIPP?
This is a type of personal pension account that is regulated by the Financial Conduct Authority (the UK regulator), and approved by HMRC.
These types of pensions offer great flexibility in investment choice, and allow you to invest your retirement funds as you see fit. These can be in individual shares, mutual funds, ETFs or even property.
Being an approved pension scheme, SIPP accounts will offer UK residents a 25% tax-free lump sum payment, known as the PCLS (pension commencement lump sum). The remainder of the funds can be accessed as and when you need the money. Any proceeds are then added to your income tax bill in your country of residence.
The main SIPP providers in the UK are AJ Bell, Hargreaves Lansdown, Vanguard and Fidelity. SIPP fees include platform fees, custodian fees and dealing fees.
The majority of providers will charge a percentage for the platform fee, and dealing fees are typically between £5 and £10 per trade.
Importantly, these types of pensions are specifically designed and tailored to UK residents. As such, many will no longer service non-UK residents, or allow foreign residents to actively manage their investments on an ongoing basis.
How is an International SIPP Different from a Standard SIPP?
The differences between the 2 accounts are subtle, but very important.
The key differential is that the International version is a purpose-built pension vehicle for Expats around the world. This means an ISIPP provides the following additional benefits for Expats:
Ability to manage your investments as an non-UK resident, and access full-flexible draw-down offshore, something which many UK providers will no longer offer post Brexit.
Option to have proceeds paid out to any international bank account, as long as the account is held in your name.
Facility to hold investments, and pay income, in all major currencies, including USD, GBP, EUR, CHF, AUD. This can help Expats hedge and prepare for currency risk.
Whole market international investment options, meaning accounts can benefit from diversification and a wide range of investment funds. This can help to provide greater growth potential for your pension plan.
Potential tax benefits by having proceeds paid out free of UK taxation. This could provide additional tax efficient retirement planning benefits depending on your fiscal residency.
It's important to note that these benefits do come at some cost. These accounts are usually slightly more expensive than traditional UK pension providers on an ongoing basis.
Make sure to engage with an independent fee based adviser to ensure the advice you receive is commission free, and that the lowest cost solutions are recommended.
What is the Best International SIPP?
If you're considering an Expat Pension Transfer, we'd currently recommend utilising the Novia Global SIPP. This is currently the lowest cost offering on the market, and it comes with an FCA regulated investment platform to manage your accounts.
Discover our in-depth review of the Novia SIPP here.
Engaging with An Expat Financial Adviser
When taking advice on your UK pensions as an Expat, we encourage everyone to conduct thorough due-diligence. Ask any adviser you speak with the following questions:
Are you regulated, and who by?
Are you fully independent, and do you receive any commissions for selling products?
Are you personally qualified to provide advice, and what qualifications do you hold?
How much will the pension transfer abroad cost, both initially and ongoing?
Will I be locked in or tied to any product, investment or provider?
What happens if I want to leave, or move my money?
The above list is not exhaustive, but should help you make a decision when considering your retirement accounts, transferring your pensions and general wealth management requirements.
Should I Transfer my UK Pension to an International SIPP?
This depends entirely on 2 factors:
Does your existing SIPP provider offer all the benefits of the International SIPP?
Are you experienced and qualified to manage your own pension fund?
If the answer is no to either of the above, you should consider your options.
The Wealth Genesis is the first Expat Financial Adviser to charge all our clients the same flat-fee, regardless of the advice provided, or the size of the pension pot.
This zero-commission approach ensures that our team's only priority is aligning your finances with your long-term goals.
To understand how we can help you, contact us using the form below.
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