Can a non-UK resident have a SIPP?

Can a non-UK resident have a SIPP? – that will be the topic of today’s article.

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One of the most common questions in the minds of most people around the world is that “Can a person who is not a resident of the UK be able to have a SIPP?”. 

Can a non-UK resident have a SIPP?

Before we get to that, we must actually know what exactly a SIPP means. In layman’s terms, SIPP (Self-Invested Pension Plan) is a personal pension scheme that allows an individual to invest money towards their retirement plan.

With the help of a SIPP individuals not only get to decide about the investments specifically intended for their retirement, but they also get to have access to a wide range of investment options.

SIPPs come with the same benefits and drawbacks as most other pension plans available in the UK, yet the major difference is that such types of pension plans come with limited opportunities for investments.

Through a SIPP, individuals are allowed to choose the funds they want to place as a part of their investment portfolio, or just keep it in the form of cash or cash-related instruments.

These wrappers containing one or more investment funds often follow a set of predefined rules, just like any other pension scheme.

Pension plans vary based on their uses and types such as defined benefit schemes, salary schemes, QROPS (Qualified Recognised Overseas Pension Scheme), etc.

Most people who regularly follow the content on our website are familiar with some types of pension schemes, especially QROPS that are tailored particularly for people living outside of the UK.

In the UK, the pension schemes come with certain tax benefits contrary to the traditional savings instruments, yet these pension schemes would have to abide by the rules set forward by HMRC (Her Majesty’s Revenue and Customs).

These rules determine how these pension schemes should function, and how they can be utilized by the people. In the same way, a SIPP also abides by the HMRC and functions in the exact same way.

Similar to most other types of pensions, the funds in a SIPP are free from income tax and capital gains tax.

This means that when you invest money, your SIPP would be usually topped by 20% by the tax authorities, and if you are paying higher taxes or additional taxes, you can claim another 20% to 25%.

The money that is being held with the help of a pension is generally made available to the individual after he or she reaches the age of 55 years, yet the rules might differ depending on the scheme.

When you want to take your funds from your pension, you can take a lump sum amount, which is usually tax-free for an amount of up to 25%. Or else, you can take the money in your pension in the form of regular monthly payments.

It should be taken into careful consideration that any sort of income that has been withdrawn from a pension scheme is usually noticed as income and would be taxed according to the income tax rates.

Therefore, if you decide to withdraw money from your pension plan, then you must do so by seeking the advice of your financial advisor so that it can be done in the most efficient way (in terms of taxes).

Who runs it? – It is not an investment so that it can be run by some fund manager or anyone else, as the investor (trustee permitting) is responsible for the decision of choosing funds.

In simple terms, it is recommended for you to choose SIPPs only when you have a considerable amount of knowledge regarding investments or at least a good understanding of the same.

Also, an investment can go both ways, meaning you can profit from it or experience losses. Worst case scenario is that it is even possible for you to lose all the money you’ve invested.

What we suggest is that investing for retirement is generally a long-term goal in the case of most people and it is better to opt for a conservative investment strategy for such people.

A SIPP can be managed with the help of a mobile phone or post, yet most people nowadays are opting for a secure online account to access it.

With the help of an online account, it is possible for you to purchase or sell your investment assets while having a dashboard that consists of all the data regarding your investments.

You can even track the performance of your assets with the help of these online accounts, just so that you stay updated on the details of your investments.

Can a non-UK resident have a SIPP?

SIPPs couldn’t be managed effectively by expats or international clients as much as they are managed by UK residents because of the necessity for being more thorough, as required by the trustees of the SIPP.

The process on how you might want to manage your SIPP might result in additional fees and charges as well.

With the help of a SIPP, you can be able to invest in a wide range of asset classes such as domestic stocks, foreign stocks, ETFs (Exchange-Traded Funds), Bonds, Cash, etc.

Fees and Charges – when compared with most other pension schemes available to individuals, SIPPs often come with lower costs that usually comprise of the following.

  • Account Set-Up Fees (around £500)
  • Annual Management Fees
  • Ongoing Fees
  • Exit Fees
  • Income Drawdown Fees

Depending on the SIPP provider, these costs may vary for each individual. Just like searching for a good bank or credit card, it is wise to compare a few options before selecting a SIPP provider.

It is very important that you know about all the charges involved with SIPPs because sometimes you might end up paying a significant amount of money.

Usually, the SIPP charges are more than what you usually pay for stocks and shares ISA or a traditional fund and share account. Some of the common types of charges involved with SIPPs are as follows:

  • Platform fees:

In most cases, platforms charge a fee for your pension funds, which can either be a percentage of the overall assets held in the account or a flat monthly fee.

Some people might know these platform fees through other names such as service charges, administration charges, custody charges, etc., and might vary in different situations.

In some cases, these platforms reduce the fees of the people who intend to invest a huge amount of money.

In some other situations, the first fraction of the investment is charged a higher amount in the form of fees, and after that, the fees would be lowered. Or else, the charges would be the same across the entire pot having a lower amount of fees.

For instance, the fees can be around 0.5% for the pensions that range up to £50,000 and then lowered to 0.3% for an amount exceeding that.

In the second scenario, the firm might charge you 0.3% on the entire portfolio where the amount exceeds £50,000, but some other firm might charge 0.5% on the first £50,000 and 0.3% thereafter.

In some specific cases, firms choose not to charge individuals when they invest in stocks, while some others charge fees. Those firms that charge fees will cap those charges up to a certain level of your portfolio.

Can a non-UK resident have a SIPP?
  • Dealing charges:

As discussed, most SIPPs don’t charge individuals for trading investments assets like unit trusts and open-ended investment companies.

However, when you choose to invest in stocks or shares, or investment trusts from your pension funds, there usually would be a cost per trade. This cost per trade might generally be reduced for investors who make more than a few trades on a monthly basis.

Therefore, when you intend to trade shares on a regular basis, the dealing fees are something that you should always look out for. There might also be a possibility of additional fees for fund management switches.

It is better to opt for a platform that doesn’t charge you such additional fees, especially you want to trade regularly.

  • Transfer fees:

In the last few years, a lot of platforms have stopped charging individuals for transferring their existing pension funds to another platform.

Despite that, some platforms still charge a considerable amount of fee (as much as £25 per holding) to transfer your assets such as stocks or funds to another platform.

When you transfer in this way, you can avoid the hassle of selling the existential units re-buy them. Moreover, some platforms even charge fees for the transfer of cash to another platform, which is rather inconvenient.

  • Early-closure fees

When you want to close your pension within a year of opening it, then you might be charged with early-closure fees.

This can be most commonly observed in the situations where the individuals open a SIPP and then start their retirement within a year or so and start drawing down their pension funds.

What most people might not know is that these fees can range around several hundreds of pounds, and therefore, it is better to know more about these charges as well.

  • Phone trading:

Making a trade with the help of a phone call while talking to another person of the firm might result in a lot of additional fees than you might anticipate.

In some cases, the fees might even be charged as a percentage of the trade, which would later turn out to be expensive, especially when you are making a large trade through a phone call.

How to pay – there is a wide array of options available for you to fund your SIPP account, which is mostly simple and hassle-free.

As simple as it gets, you can fund your SIPP with the help of other pensions, regular money payments, or lump sum payments into your account.

If you want to opt for transferring via your pension, you must consult your pension provider and your financial advisor. Not only would there be penalties for exiting from these, but you might also have to deal with potential losses.

How do I get the money? – After you reach the retirement age, you would want to withdraw the funds that are available within your SIPP.

To do so, there are various options available to you just as any other pension scheme, which depends on your situation.

Until 2015, most people would go with purchasing annuities as they offer guaranteed income for life.

But in 2015, there were some changes made to the pension regulations, and the amount that used to be paid by annuities also decreased. After that, annuities lost their reputation as a preferred choice among most SIPP holders.

Another option is to withdraw lump sum amounts from the pension, which sounds good, but you must be familiar with the fact that pension is treated as income in many countries and taxed in the UK along with an individual’s country of residence.

This means, the PCLS (Pension Commencement Lump Sum) of 25% that is not taxed in the UK, would be subject to taxes in the country of your residence.

It is very important to get acknowledged about the ways of accessing pension funds in a tax-efficient manner.

Now, let us talk about the main topic for today, i.e., “Can you open a SIPP as a non-UK resident?”

Can a non-UK resident have a SIPP?

SIPP for non-UK residents:

The SIPP that is accessible by non-UK residents is known as an International SIPP, which is almost the same as SIPP but is based outside of the UK.

Instead of being available in just a few places, people can access an International SIPP from various places in the world.

One thing you must remember about the international SIPPs is that they might not be as safe as the SIPPs because SIPPs in the UK are insured for an amount of up to 85k and are regulated by the FCA.

However, this does not mean that you are invincible because if you choose a bad advisor to take care of your investments, then you might end up losing money.

The international SIPPs also come with regulations, yet they might not be as effective as the traditional SIPPs based in the UK.

Major advantages of International SIPPs – Some of the most advantageous features of international SIPPs are as follows.

  • Tax-free gains
  • Wide range of investment opportunities
  • People can have all of their pensions in one place
  • Ability to list a beneficiary
  • Availability of multiple currencies

When you opt for investing in a SIPP, the capital gains arising from those investments are generally free from the income tax and capital gains tax.

Additionally, you will be having availability for a wide range of investment opportunities allowing you to reach your full potential while coping with your risk tolerance.

If you follow our strategy of long-term investments and conservative investment strategy, then your investments would be in a safe place while securing your future with guaranteed returns.

One of the biggest benefits of a SIPP is that expats can put all their pensions in a single place without having to face any sort of difficulties.

The regulations make it a tad bit hard for individuals to transfer their final salary to a SIPP, but the process of transferring other pensions is a comparatively simple process.

This is a viable option for keeping all your investment assets in one place while being able to track them easily.

Given below is a table that consists of the top international SIPPs and their respective fees.

NameSet up feesTransfer in feesAnnual feesTransfer out to other UK scheme
Forthplus SIPP£400£0£400£0
iPensions (Momentum) Adviser SIPP (under £1 million)£300£0£500£500
iPensions (Momentum) Adviser SIPP (£1 million to £1.5 million)£300£0£1,000£500
iPensions (Momentum) Adviser SIPP (£1.5 million to £2 million)£300£0£1,500£500
iPensions (Momentum) USA SIPP (under £1 million)£300£0£500£500
iPensions (Momentum) USA SIPP (£1 million to £1.5 million)£300£0£1,000£500
iPensions (Momentum) Adviser SIPP (£1.5 million to £2 million)£300£0£1,500£500
PSG Harbour International SIPP£399£75£399£499
Sovereign International SIPP£300£0£500£250
STM International Pension Plan (Fixed Rate)£150£0£550£860

Transferring into an international SIPP – Like mentioned earlier, transferring money into an international SIPP is a very simple process and can be done while acquiring the help of an advisor or you can do it by yourself.

In order to have an international SIPP, you must contact your current provider and find the details regarding the surrender charges.

After making sure that there are no surrender charges, you can open an account with the platform, request for a transfer, and select the type of investment asset in which you want to put your money.

During this process, you would usually be asked to sign and provide certain types of documents such as:

  • Income source
  • Source of wealth
  • Identity proof
  • Financial statements

These are the general steps involved while making a transfer into an International SIPP. However, if you choose to transfer with the help of your advisor, the process will differ a bit.

Firstly, you would be necessitated to provide a letter of authority for checking the amounts related to the pension.

Just like earlier, you must make sure that there are no surrender charges. Complete all the necessary documents such as identity checks and source wealth.

Determine your risk profile, select the assets that you want in your portfolio, and finally, you can request a transfer.

The process might vary a bit or involve some additional steps, but nevertheless, these are the main steps involved with making a transfer into an International SIPP.

Don’t worry if you aren’t working along with a financial advisor as of now, you can get access to the top-notch financial solutions offered by us, and for that, all you have to do is click here.

If you work with an online advisory, you can just go ahead and complete the process by submitting copies of the documents online. Regardless of the country you live in, you can acquire an international SIPP.

Choosing the right SIPP – when you feel that you are ready to have an international SIPP, it is very crucial for you to select the perfect investment platform based on your requirements.

Some of them offer the very cheapest SIPPs, which are very affordable and preferred by most people. By selecting such SIPPs, you will only be provided access to a limited range of investments.

Bigger firms allow you to have access to a wide range of asset classes such as funds, stocks or shares, etc.

Finally, if you need access to a full range of investment assets that are allowed to be kept in a SIPP by the taxman, you need to select ‘Full SIPPs’.

Tips to consider – here are some useful tips for you to follow while setting up a SIPP.

  • You must know everything about the potential advantages and disadvantages of having a SIPP.
  • Double-check whether a SIPP is right for you.
  • Know about all the options available for you, regardless of whether you are an expat or a UK resident.
  • The most important thing to do is to know about all the fees and charges involved with SIPPs because there are various types of fees/charges depending on the platform you choose.
  • Don’t just go ahead with the SIPPs that have been offered to you by the people, whom you didn’t contact. Individuals who make cold calls can often mislead you regarding the information, or they might even scam you.
  • Retirement planning is a long-term strategy, and therefore, you must not worry about the surges and falls related to the prices of your investment assets.

Bottom Line:

Investing money can be as hard as choosing the right type of SIPP, and when you don’t have enough knowledge regarding these types of pension schemes, you might end up losing a significant amount of money in the form of taxes, fees, and other charges.

Make sure that you always consult a financial advisor before you make any decisions related to the important aspects of your life such as pension schemes, retirement planning, investment management, etc.

If you aren’t currently having a financial advisor or investment planner to take care of your financial needs, you can obtain the best-in-class financial solutions that we offer.

We offer all the services you need for planning your retirement or selecting a pension scheme that is tailored for your investment goals and financial objectives.

You can also learn the process of investing through our ‘Adam Fayed Academy’ and start investing on your own.

That being said, we hope that this article came in handy for you to find all the relevant information about having a SIPP as a non-UK resident.

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