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What is the difference between a SIPP, an international SIPP, and a QROPS?

Contributed by QROPS Specialists
03 September, 2019


A UK Self-Invested Personal Pension (SIPP) is regulated in the UK and is set up in GBP. These are self-invested pension schemes.

An international SIPP can be set up in multiple currencies: GBP, EUR, and USD. Often an international SIPP requires a financial adviser to be attached.

A Qualifying Recognized Overseas Pension Scheme (QROPS) is a pension scheme set up abroad, outside the UK that is set up to receive UK tax-relieved pension monies. It can be set up in most currencies. This reduces the exchange rate risk problem. Usually, a QROPS requires a financial adviser to be attached. Normally, the client may have some say in how to invest his pension monies, but the client cannot self-invest.

SIPPs have no tax on growth, but there are death taxes after the age of 75.

QROPS based in Australia, NZ, Malta, Gibraltar & India attract no tax on growth or death as long as the client remains outside the UK. 100% of a pension pot can be passed on to any named beneficiaries.

QROPS and Brexit... the clock is ticking

Some countries such as Portugal, Spain & France have extended health insurance and social benefits, but only if you apply for residency before the end of 2020.

QROPS for European Residents

A Malta QROPS is an EU regulated pension plan which can be set up in EUR or any other currency.

  • Transfers the pension outside the UK with the option to move back to a SIPP in the UK if you ever return
  • No tax on growth or death as long as you don't return to become resident in the UK
  • Pension can be set up in EUR and invested in European equities and bonds. This removes most of the exchange rate risk of keeping a pension invested in GBP
  • Income tax may be more favourable than leaving your pension in the UK, but depends where you live in Europe

QROPS for Australian Residents

You can transfer a UK pension to Australia if you are considering moving to Australia permanently.

  • Must be 55 years old to transfer to a QROPS in Australia; if younger, consider an international SIPP set up first to consolidate your pension scheme(s)
  • There are limits to the amount you can transfer into the Australian QROPS each year
  • There is no tax on growth, death or income
  • Schemes are often set up in AUD to reduce exchange rate risk
  • Regulated by ASIC in Australia

QROPS for New Zealand Residents

You can transfer a UK pension to New Zealand if you are considering moving to New Zealand permanently.

  • Future UK tax changes won't affect your scheme once transferred
  • Your pension can be set up in multiple currencies including GBP and NZD
  • There is no tax on growth, death or income
  • Regulated by the FMA in New Zealand

QROPS for UK Pension Transfers to India

Indian QROPS can be set up only if you decide that you want to permanently reside in India.

  • Pension is set up in India in Rupees only
  • No tax on growth or death
  • Invests in Indian equities and Indian government debt
  • 1/3rd payable as a tax-free cash lump sum

Exit Tax Explained

Due to many people trying to deliberately avoid UK taxes whilst having no intention to settle abroad, HMRC have become a lot more stringent with its pension transfer rules. Under the new rules, you must remain tax resident abroad for five years following the transfer to a QROPS or you must move your pension scheme to a different QROPS in the new country you are moving to in order to avoid a retrospective 25% exit tax from HMRC.

What If I Live Elsewhere in the World?

For expats moving to Asia, Africa, Latin America, Russia or elsewhere in the world, your options are more limited. It is best to speak to a financial adviser or QROPS specialist to discuss the options. You could explore setting up an international QROPS in a different currency, whilst reinvesting your pensions into the most risk appropriate funds.

QROPS Specialists works with regulated financial advisers and companies in the United Kingdom, Europe, India, Hong Kong, Malaysia, Australia, and New Zealand.




 


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