Benefits from an Offshore Pension

Every year it is estimated that around 350,000 people emigrate from the UK. Whether it be relocating and working overseas or retiring abroad, it is essential that you consider the benefits of moving your pension outside of the UK.

International pensions are fairly new, with the recent introduction of SIPP-QROPS (Qualified Recognised Overseas Pensions Schemes) by the HMRC (Her Majesties Revenue & Customs). In order to transfer your UK pension to an overseas scheme, the receiving scheme must meet the criteria established through the SIPP-QROPS rules.

At this stage, only Non-Protected Rights (money that you or your employer has contributed) can be transferred into a SIPP. It is anticipated that it will be possible in the near future to also transfer Protected Rights (SERPS, or S2P, rebates from your National Insurance Contributions from being Contracted Out).

We have access to several schemes, all Isle of Man registered and fully regulated by the Isle of Man Government Financial Supervision Commission (FSC). The Isle of Man is one of only a few jurisdictions worldwide to be awarded a AAA rating by both Standard & Poors and Moodys.

Offshore pensions are not suitable for everyone, especially if you only plan to be overseas for a short period of time and intend to return to the UK before you retire. It is vitally important that you seek independent financial advice regarding your options from one our fully qualified financial advisers.

We offer a free initial consultation, if an Offshore pension is not suitable for you, we will advise you and there will be no fee. If this is suitable, ongoing advice can either be on a fee or commission basis and can be agreed beforehand.

Until recently it was very difficult to legitimately move UK pension benefits, built up during a working lifetime, outside of the UK. With the introduction of Qualifying Recognised Overseas Pensions Schemes (SIPP-QROPS ) all that has changed. SIPP-QROPS are offshore pension arrangements which meet the rules of the jurisdiction in which they are located and authorised in that jurisdiction as pensions.

HM Revenue and Customs (HMRC), backed by primary legislation, have put in place a pre-approved system whereby UK pensions rights can be transferred outside of the UK into a SIPP-QROPS at the pension holder’s request.

To obtain SIPP-QROPS status, a SIPP-QROPS provider must meet a number of HMRC rules relating to how and when benefits can be taken, together with reporting requirements for five complete tax years after the member has left the UK. Not all overseas pension schemes qualify as SIPP-QROPS and therefore attempting to transfer into un-authorised schemes should be avoided at all costs. It is important to seek professional qualified and authorised advice.

In order to transfer UK pension rights to a SIPP-QROPS , the member must have left or intend to leave the UK for tax purposes. In this case, UK pension rights can automatically be transferred outside of the UK into SIPP-QROPS in the same way as pensions can be transferred between approved providers within the UK. When benefits are transferred to a SIPP-QROPS they do not suffer a UK tax charge.

UK pension rights may be transferred outside of the UK into SIPP-QROPS either before the member commences benefit or once they have come into payment. This includes most types of pension including income drawdown currently in payment and protected rights, which are pensions which have accrued as a result of UK national insurance rebates. However it is not possible to transfer an entitlement to the basic UK state pension into SIPP-QROPS , or to make a transfer after an annuity has been purchased or Final Salary Schemes are in payment.

Many SIPP-QROPS impose some restrictions, to the extent that an individual must be resident in the country into which they are transferring their pension benefits. However, certain SIPP-QROPS do not have this restriction and so there is no link between where the member lives and the geographical location of a SIPP-QROPS . In this case the member is able to choose tax friendly jurisdictions that have more flexible rules for how benefits can be taken.

A significant benefit for those who are not UK resident at the time they start drawing their pension benefits is that payments from SIPP-QROPS will not suffer any UK tax. Their location of tax residence may have impact in terms of local taxes but with careful planning and specialist advice this can be minimised.

Once someone has been resident outside of the UK for five or more complete tax years and has transferred their pension rights to a SIPP-QROPS , the reporting requirements to HMRC cease. This means that contingent on the rules relating to the individual SIPP-QROPS , more flexible ways of taking benefits can be introduced.