Before introducing this article, if you are interested in our core services which are expat financial, insurance and mortgages, you can contact me here. 

The best time to consider your financial situation is when you are moving to a new country.

Introduction

For many days, India has been one of the preferred destinations for the people of the UK, where it is for a temporary basis such as vacation/tour or a permanent basis such as retirement.

In most cases, these people are actually from India who’ve gone to the UK for employment (mostly) and wishes to come back to India.

If that’s the case, then they would have to go through a lot of complex issues to transfer their pension to India. Therefore, in this article, we will discuss how you can transfer your UK pension to India and what are the options to do so.

First of all, for those of you who may not know, India happens to be one of the countries outside of the European Union, where UK pensions can be transferred.

Options – For transferring your UK pension to India, you might have to choose from one of the three options provided below.

1. QNUPS
2. ROPS
3. International SIPP

Just stating the methods won’t be helpful, and hence, let us discuss more on each of these options individually.

1. QNUPS

QNUPS stands for “Qualified Non-UK Pension Scheme” and it was introduced by the HMRC in February 2010. QNUPS is a regulated pension scheme with tax benefits, which permits investment of wealth overseas.

Despite being a pension fund, QNUP comes with some potential advantages such as tax benefits and flexibility. Moreover, there is specific criteria for the people to take part in QNUPS.

Features:

• When it was introduced in February 2010, there were some specific set of rules that made sure that offshore pension schemes won’t be imposed with the UK’s inheritance tax.

By keeping your assets in an offshore pension scheme, you will have the privilege of avoiding the UK inheritance tax, which is considered a 100% legitimate way to do so.

• Another major benefit of QNUPS is that people aren’t required to be present in the countries that have a double taxation agreement (DTA) with the UK.

Instead, they can be from most countries, which is potentially advantageous in two ways. First, there won’t be any requirements for reporting to the HMRC, which is a bit of a relief to the people staying abroad.

Secondly, people, having the ability to have a QNUPS from many countries, have access to a wider choice to stay in countries other than the UK while enjoying the pension benefits.

• There is no maximum limit on how much money can be transferred using QNUPS, while other offshore pension schemes come with a limit.

• Not just on the money that can be transferred, but there is no maximum limit for the age of a person to make contributions in a QNUPS. You can just go ahead and make contributions to a QNUPS as long as you wish.

• One of the most important benefits of QNUPS is that they are tax-efficient. All your assets and capital gains held within your QNUPS are provided to your beneficiaries without any taxes.

In some pension schemes, you might be charged around 40% as a tax, but that’s not the case with QNUPS.

• Contributions are not only unlimited but they can be made from a wide range of sources.

In simple words, you may not just contribute the money earned as income, instead, you can contribute money from whichever asset you own.

• In some pension schemes, the assets have to be liquidated before getting into the pension scheme, which is not the case with QNUPS. QNUPS accepts a wide range of assets such as residential properties, vintage wine, antiques, etc.

• Another considerable advantage of QNUPS is that you won’t be taxed on your capital gains. The entire capital growth of your assets would be passed over to the beneficiaries listed by you.

• Just like a SIPP or a QROPS, the amount that can be taken out as a pension commencement lump sum (PCLS) is 25% to 30%.

Things to consider:

It should be remembered that when people try to avoid the IHT deliberately, then they would be subject to tax.

To transfer the funds from a UK-registered pension scheme to QNUPS, the pension schemes must also qualify as a QROPS.

QNUPS can be utilized as a tax-efficient wrapper for making an investment in the residential property of the UK.

Just like other pension schemes, QNUPS function as trust arrangements, and it could be potentially beneficial when QNUPS is tailored as a contract-based scheme.

The exit route from a QNUPS should be taken into careful consideration because a few years from now the tax situation might be subject to changes.

• QROPS:

Not just the people who move to India, but the half a million people who move abroad from the UK often have the same question, which is whether to let their pension funds stay in a British pension plan or move it to their new country of residence.

QROPS often come in that list as one of the qualifying pension schemes that allow an individual to transfer their pension funds into their new country of residence.

So, let us discuss all the details about QROPS including requirements, tax benefits, advantages, and disadvantages.

To those who may not be familiar, QROPS stands for “Qualifies Recognized Overseas Pension Scheme”, which allows British nationals to transfer their pension overseas after being able to meet certain criteria.

Usually, this criterion has been set by the British tax agency, i.e., Her Majesty’s Revenue and Customs (HMRC).

By the year 2018, QROPS had more than 123,000 transfers that were equivalent for an amount up to £10.7 billion since their inception in 2006, which was equal to around £898 million (approx.) annually.

For being qualified as a QROPS, the pension scheme is required to meet some requirements that have been set by the laws in the UK.

An example of the requirements is that an individual should be of an age of more than 55 years for accessing the funds unless there are some special situations.

It should be duly noted that not every overseas scheme out there in the world is able to meet the criteria set by the government of the UK.

The official website of HMRC contains a list of countries that qualify for QROPS and the schemes available within those countries. This list is generally updated twice per month by the HMRC.

By the time of writing this article, there are currently 29 countries having access to QROPS. The countries in this list are as follows:

• Australia
• Austria
• Barbados
• Belgium
• Bulgaria
• Denmark
• Finland
• Germany
• Gibraltar
• Guernsey
• Hong Kong
• India
• Ireland
• Isle of Man
• Jersey
• Kenya
• Latvia
• Liechtenstein
• Luxembourg
• Malta
• Mauritius
• Netherlands
• New Zealand
• Norway
• South Africa
• Sweden
• Switzerland
• USA

Before you can transfer your pension funds into a QROPS, we highly suggest you get in contact with a financial expert, who is familiar with all these aspects.

Features:

• QROPS might be beneficial to some retirees, whereas they might be considered advantageous for some others.

• When you transfer, you will be having the ability to consolidate all your pensions into a single pension scheme, which makes the process of managing them easily and reduces the money needed to be spent in the form of fees.

• This also allows managing all your finances in a single currency, which is quite helpful in most cases.

• Not only would be easy to manage all the finances in that country, but you can also avoid the hassle of worrying about the fluctuating exchange rates.

• The tax liability can also be reduced in the new country of residence depending on the taxation rules.

• The process of investing money with QROPS is made more flexible compared to British pensions.

• The fees and charges involved with QROPS happen to be transparent.

• When you are over the age of 75 years when you die overseas, then there won’t be a tax for the beneficiary to receive the pension.

• In the early days, it was mandatory for the people to utilize 75% of their British pension funds to buy an annuity, which would usually offer a guaranteed income for a lifetime.

It sounds good, but the major disadvantages of this concept were that the returns were low, the imposition of income tax, and the expiry of the pension fund when the person dies.

By transferring the pension to a QROPS, when a person dies, the annuity would be provided to the dependents of the individual or beneficiaries listed by them.

• Apart from being tax-efficient, the fund transfer process is very simple and the process of transferring funds to the beneficiary has been made easy.

• People who transfer their pension funds into a QROPS are allowed to get 25% of the funds as a tax-free lump sum amount.

• QROPS is free from the IHT (Inheritance Tax), which is around 45% and deducted at source for some other pension schemes.

As we talked about before, QROPS might not be a viable solution for everyone, and most people lost a considerable amount of money because of the advice they’ve received from inexperienced advisors.

For instance, when the pension is transferred into a QROPS, people would lose the benefits that usually come with their British pension plan.

In some cases, these benefits tend to be more lucrative when compared to the benefits acquired from transferring the pension overseas.

Along with that, when the pension funds exist within the UK, then they are offered protection from the FCA (Financial Conduct Authority).

Some other disadvantages include fees, maintenance costs, etc., and people might have to move to another country if their country loses QROPS status.

There are 4 types of fees applicable to QROPS namely “Annual Fees”, “Initial Transfer Fees”, “Fees within the investment”, and “Advisory Fees”.

Process – The process of transferring a UK pension to QROPS has been given below, and it should be noted that the timeframes have been provided as a reference and the actual timeframes may vary based on the factors influencing them.

• During the first week, the individual must go ahead and get all the details related to the process from a financial expert.

Then, the advisor will send a letter of authority to the individual so that they can take over for the individual and deal with the current pension provider.

• Following the first week, the individual is required to send an email or fax the letter of authority while sending the original copy as well.

The advisor who contacts the current pension provider will check the eligibility of the individual and confirms whether the pension fund qualifies for a transfer or not.

• After 4 weeks, the individual is required to clarify the details regarding their selected jurisdiction, and these details are to be provided to the advisor.

Right after that, the current pension provider would be sent a discharge form and the QROPS provider would be sent an application form.

Finally, the pension funds of the individual would be transferred to the QROPS while offering tax-free income present in the currency of the individual’s choice and the individual can also choose from a wide range of assets to make an investment.

The QROPS plans available in India as of writing this article are as follows:

• “Canara HSBC Oriental Bank of Commerce Life Insurance Secure Bhavishya Plan”

• Exide Life Golden Years Retirement Plan

• Exide Life My Retirement Plan

• Exide Life New Immediate Annuity

• Exide Life New Immediate Annuity with Return of Purchase Price

• Exide Life Smart Pension Plan

• HDFC Life Assured Pension Plan

• HDFC Life Click 2 Retire

• HDFC Life New Immediate Annuity Plan

• HDFC Life Pension Guaranteed Plan

• ICICI Pru Easy Retirement

• ICICI Pru Easy Retirement SP

• ICICI Pru Guaranteed Pension Plan

• ICICI Pru Immediate Annuity

• Kotak Assured Pension Plan

• Kotak Lifetime Income Plan

• SBI Life Annuity Plus

QROPS might be beneficial to you, or in some cases, it might be better for you to leave the pension funds within the British pension plan itself.

If you don’t have clarity on what to do, you can get in touch with an expert financial advisor (like us), who might be able to determine your situation and determine whether QROPS is suitable for you.

Even if you have an advisor and are not happy with their service, then you can opt for another advisor and take care of all the things for a few additional costs.

• International SIPPs:

To know what an International SIPP is, you must get familiar with a SIPP (Self Invested Personal Pension). SIPP is a UK pension scheme that permits investors to maintain an investment strategy towards their retirement.

The individual is able to take all the investment decisions instead of relying on trustees. In general, SIPPs are known to be UK-based pensions for expats living in the UK or UK residents living abroad.

SIPPs are known to be suitable for investors who have significant pension pots and desire flexibility in terms of investments.

These are preferred by investors who live outside of the UK on a temporary basis while intending to return to the UK in the future. In case these individuals die, the beneficiaries who return to the UK might be able to benefit from these.

Just like the other two pension schemes we’ve discussed, SIPPs are also free from the inheritance tax in the UK and considered the best option for investment planning.

If you think that your funds would increase by £1,000,000 by the time of your retirement, then a QROPS would be considered suitable for you.

However, it is common knowledge that QROPS and QNUPS are considered to be expensive when compared to SIPP products.

Even when some products might seem less expensive, QROPS and QNUPS tend to become expensive over time, especially in terms of annual fees.

People who are below 74 years of age and want to contribute towards their retirement can find SIPPs to be profitable in contrast to QROPS.

However, as we are talking about UK pension transfers, SIPPs can’t be utilized, and that’s where International SIPPs come into action.

International SIPPs are nothing but SIPPs that can be accessed by people who are not residents of the UK. These are not limited to a few places, and people belonging to various countries are able to access an International SIPP.

International SIPPs might not come with the same level of protection as the SIPPs because they are not regulated by the FCA, yet there are some regulations for these as well.

Features:

• Just like the other two options we’ve mentioned, International SIPPs also have tax benefits.

• With the help of International SIPPs, you would be having access to a wide range of investment opportunities.

• All the pensions of an individual can be kept in a single place and managed efficiently without any type of hassle.

• People can list beneficiaries to get the funds after they expire, and contributions can be made in various currencies.

While you want to have a SIPP product, you might be required to present the details such as income source, identity proof, financial information, etc.

Based on the pension freedom act of 2015, it has been stated that International SIPPs and SIPPs are the pension schemes that allow individuals to have more control over their pensions.

SIPPs do come with a significant potential for growth, yet it should be duly noted investments must be done carefully.

The thing with investments is that they can either go up or down, and nobody can anticipate the exact returns on the money they’ve invested.

To know more details about international SIPPs, check out this article.

People who are living in India have the ability to transfer their pensions into a wide range of investment platforms in various regions like the Isle of Man, Hong Kong, Singapore, etc.

By doing so, they will have broad exposure to various investment opportunities and when those individuals return home, they would be having the accessibility to local market funds.

However, investments are to be wrapped in a trust and the cost of investment platforms is becoming the same as the SIPPs in the UK.

To get more from SIPPs, it is highly recommended to contact your financial advisor and discuss the details with them.

Which is the best?

Well, this is a tough call. Till 2017, it was taken into consideration that QROPS were the best available options for the people who wanted to transfer their UK pensions to India.

Nonetheless, the current scenario is different because there is a 25% tax applicable to overseas transfers, which is a bit inconvenient.

When you have a smaller pension pot, then you can opt for International SIPPs because ROPS are taxed at a rate of 25% for the transfer, while with a SIPP, you can utilize it with your local provider.

One major thing that needs to be focused on is that anything less than the Lifetime Allowance of £1,073 million is considered to be too expensive for a pension transfer as per the 25% overseas transfer charges.

SIPPs can be flexible in terms of the rules while offering protection and are easier to be managed.

By transferring your SIPPs offshore, you can be able to invest the funds acquired from your pension scheme into various investment opportunities available in India.

Note – Pensions that can be transferred to an international scheme while moving back to India are defined contribution schemes, defined benefit schemes, UK SIPPs, Small Self-Administered Scheme (SSAS), or an employment pension.

Bottom Line:

It is hard to determine which method is better for you to transfer your UK pension to India without knowing certain factors such as your financial situation, retirement goals, and other financial aspects.

To know the best way to transfer your UK pension scheme to India, get in touch with us and acquire the best-in-class financial solutions offered by us.

We also offer a wide range of investment advice based on your investment goals or even manage your assets on your behalf. To get access, click here.

Retirement Planning and Investment Management can tend to be a lot hard than one can actually imagine. Even when a small mistake has been done, the price that has to be paid by the individual might turn out to be expensive.

Therefore, it is better to acquire the necessary knowledge from a professional rather than making hasty decisions in such important aspects of life.

That being said, we hope that you were able to find this article informative and we wish you luck with all your endeavors!!!

Before introducing this article, if you are interested in our core services which are expat financial, insurance and mortgages, you can contact me here. 

The best time to consider your financial situation is when you are moving to a new country.

Introduction

General Information:

One of the most important aspects of a person’s life is the process of planning for retirement.

Retirement Planning – Retirement planning is a very crucial strategy where an individual sets some specific retirement goals and determining the things that they have to do for achieving those goals.

In general, the process of retirement planning includes noting the sources of income, recognizing the expenses, creating a savings plan, and handling the assets for reaching the goals.

In the United States, some of the popular investment vehicles are IRAs (Individual Retirement Accounts) and 401(k) accounts, which allow a person to save money towards their retirement while having some tax benefits.

While planning for retirement, it is also very essential for people to estimate certain aspects such as retirement expenses, liabilities, life expectancy, etc.

Pension Plan – Pension Plan is a type of retirement plan that necessitates an employer to contribute a certain amount of money towards their retirement.

Pension plans are of two major types namely ‘defined benefit plan’ and ‘defined contribution plan’.

The defined benefit plan allows an individual to have pre-determined monthly payments or a lump sum amount of money upon retiring.

On the other hand, the defined contribution plan allows you to have an investment account, with the help of which, you can invest money until retirement and use the money for your retirement.

If you are in the UK or if you are a UK resident living abroad, there are certain pension schemes known as QROPS, QNUPS, and SIPPs.

So, what exactly are these pension schemes and how do they operate? If you are thinking the same, then don’t worry because it is a common doubt that arises in the minds of most people trying to save their money towards their retirement.

Some people might already be familiar with these terms, yet they aren’t sure about which pension plan suits them best.

In this article, we will discuss these pension plans in detail, and after going through this article, you won’t be having the doubt regarding which pension plan suits your retirement goals.

QROPS (Qualified Recognised Overseas Pension Scheme):

A QROPS, which stands for “Qualified Recognised Overseas Pension Scheme” is a pension plan for people (expats) living outside of the UK or the people who wish to move abroad as a part of their retirement goals.

Why move to other countries? Well, some people have the desire to retire in other countries based on various reasons such as suitable cost of living, the standard of living, etc.

For such people, it might become hard to move the money in their pension scheme abroad, especially due to the tax complications.

With the help of QROPS, people can transfer their money existing within their UK registered pension scheme.

How? Well, the QROPS informs the HMRC (Her Majesty’s Revenue and Customs) that the specific individual is qualified and meets the necessary requirements for making a transfer of the funds within the registered pension scheme.

Usually, your employer or the pension provider is obliged to inform the HMRC when you retire. However, in order to avoid the delay of this, you should also inform HMRC regarding this matter.

If the matter is not informed to HMRC, then it would lead to a situation of overpayment or underpayment of taxes. Self-employed individuals, who are about to retire must definitely inform HMRC.

With the QROPS, you can avoid this hassle and be able to transfer your funds simply to the country in which you would like to retire.

Like said before, QROPS is beneficial to the UK expats that are already living abroad or the people who plan to leave the UK by the time they retire.

Apart from these types of individuals, people who are near their Pension Lifetime Allowance (£1,073,100 during 2021-2022) can also alleviate the taxes in the future, which are usually applicable while withdrawing the pension benefits.

People who intend to take out a QROPS must be living outside of the UK regarding tax purposes or must be planning to leave.

People who intend to move out of the UK on a permanent basis are able to benefit more from QROPS because the UK government policy allows transfers to overseas pension schemes without imposing tax penalties.

Since 2017, a tax charge of 25% is applicable on the pensions that are transferred to QROPS, with an exception made when the individual and the pension scheme exist within the EEA (European Economic Area).

It has been stated very clearly that the payments made for a period of ten years should be reported to HMRC, after the transfer of the pension.

This reporting activity is carried out by the trustees of QROPS.

Difference between QROPS and ROPS – most people might also have heard about ROPS (Recognised Overseas Pension Scheme), and such people would be wondering what the difference between QROPS and ROPS is.

Well, typically they are the same. The only difference between QROPS and ROPS is that QROPS takes up the responsibility of informing HMRC about the member payments and determines that the individual meets the qualifying criteria.

Income – For being a ROPS, the ROPS rules related to how you take your income should be the same as the rules governing the UK pensions.

The maximum lump sum money that is exempt from taxes is around 25% to 30% and is known as ‘Pension Commencement Lump Sum (PLCS)’.

This PLCS amount varies depending on the region of QROPS and the specific period for which you have been a non-UK resident.

Some jurisdictions can utilize the UK Government Actuaries Department (GAD) rate limits for determining the income they get. This usually means that you can obtain a higher income level from a QROPS contrary to a UK defined benefit scheme.

Restrictions – QROPS only deal with transfers related to UK pension schemes and all types of assets must be liquidated before they could be transferred to a QROPS.

Any individual can acquire the benefits of QROPS before they reach the age of 75 years (maximum age limit).

In general, the jurisdiction for the QROPS must have an appropriate DTA (double taxation agreement) with the QROPS member’s preferred country of residence that they’ve selected for retirement.

If not, then the individual has to meet certain conditions related to the QROPS.

Taxes are applicable on the transfers that don’t qualify for these conditions, yet the individual can avoid these tax implications if they have been a resident for five years in the country same as the QROPS.

While indulging in this, the whole Europe region is considered as a single jurisdiction.

There isn’t any inheritance tax or a death tax on the QROPS funds or UK pension funds. Nevertheless, there might be a death tax or an inheritance tax in the country in which the individual is resident.

Pros of QROPS:

• Various small pension funds can be converted into a single one while having a higher purchasing power and accessibility to better investment opportunities.

• 25% to 30% tax-free lump sum amount that can be obtained starting at an age over 55 years.

• 100% of the amount in the pension scheme is transferable to beneficiaries.

• Both UK residents and non-UK residents can utilize QROPS for planning their LTA. A transfer made to a QROPS is considered a Benefit Crystallisation Event (BCE).

As per the current rules, once the transfer of the pension funds has been done into a QROPS, they are able to grow without the necessity for the assessment of LTA limits.

• Depending on the jurisdiction and the double taxation agreement, there might be potential tax advantages with QROPS.

Cons of QROPS:

• The trustees of QROPS should report to HMRC.

• Transfer charges can be high.

• In some cases, when the funds are mis-sold or aren’t regulated in the UK, then there can be additional taxes.

QNUPS (Qualifying Non-UK Pension Scheme):

A QNUPS is mostly similar to a QROPS while having some differences.

QNUPS is the best option for people who wish to have an international pension scheme.

In some cases, QNUPS are provided to people who have a higher net worth and already utilized their maximum tax-free pension contributions in the UK.

There are restrictions regarding the residence of an individual when it comes to QNUPS, as people from anywhere can have them.

Nevertheless, the country of individual’s residence might have a different type of tax treatment, and therefore, it is better to know those details prior to opting for QNUPS.

Unlike the reporting scenario that we discussed while talking about QROPS, there is no need to report to the HMRC when you choose QNUPS.

However, QNUPS is not allowed to receive transfers from the UK registered pension schemes that are free from taxes.

Income – Income can be acquired by individuals at the age of 55 years, or it can be postponed until the age of 75 years or more.

From the year 2017, 100% of the income taken from a QNUPS or QROPS that has been taken by a UK resident is subject to taxes in the UK as per UK tax rules.

QNUPS abide by the local rules and regulations while determining income, as per the jurisdiction where the scheme is active.

The income withdrawn with the help of a QNUPS is subject to taxation on the basis of the country of residence when the income has been taken.

In most cases, QNUPS are often seen as a method for avoiding the IHT (Inheritance Tax) instead of being considered as an option for accessing income by the member and this defeats the whole purpose of setting up a QNUPS.

You can get up to 30% of the amount as a tax-free lump sum at the age of 55 years, which may not be considered a big deal.

Restrictions – an advantage with QNUPS is that assets might not have to be liquidated before they can be transferred. While thinking of it from a different perspective, this might be more of an advantage rather than a restriction.

Usually, any type of asset class can be transferred to a QNUPS, which comprises alternative investments like residential properties, antiques, expensive wine, etc.

If we think of this in a detailed manner, this might be practically difficult. Even when it is possible, the costs involved with this tend to be higher than usual and are wholly dependent on the rules of receiving QNUPS.

Funding the QNUPS must be similar to that of pension funding, and as a general principle, you can expect 20% of the annual income to be accepted.

The age restrictions for withdrawing the funds from a QNUPS are dependent on the jurisdiction of the QNUPS.

There is no death tax in the UK unless the QNUPS member is intentionally trying to reduce the value of their estate before death by transferring a considerable portion of their estate to the QNUPS.

Regarding this situation, the HMRC would check whether the transfer took place shortly before the death of the individual, and it is indeed done that way, then taxes are applicable.

Pros of QNUPS:

• Immediate shelter from IHT.

• No limits on contributions. As the HMRC is actively concentrating on offshore structures, it is a good idea to restrict the entire contributions to a certain proportion of your entire net worth (such as 50%).

• No maximum age limit for starting to invest in QNUPS, yet the actual rules may vary depending on the jurisdiction of the QNUPS.

• Unlike QROPS, there are no lifetime allowance limits on the fund size when you choose to go with QNUPS.

• 100% of the QNUPS is transferable to beneficiaries.

Cons of QNUPS:

• There are no specific details regarding the tax treatment of QNUPS in most cases.

• No UK tax relief.

• Being famous for acquiring protection against inheritance tax, it is highly recommended to be cautious and acquire the proper amount of advice while choosing to opt for QNUPS.

• In some cases, QNUPS are often sold to individuals by stating them to be exempt from pension sharing rules on divorce, which is completely misleading information.

SIPP (Self-Invested Personal Pension):

SIPP (Self-Invested Personal Pension) is a personal pension scheme, which is of the defined contribution type. SIPPs are set up in the UK and are registered with the HMRC.

Any person having UK pension assets, which are already existing, can be able to profit from the flexibility of a defined contribution pension scheme while having access to unrestricted investment opportunities.

In most cases, SIPPs are only made available to people living in the UK. Nonetheless, people from other countries or people who wish to move to the UK might also be able to get their hands on SIPPs.

People who get involved with a SIPP should report all of their taxable transactions to the HMRC with the help of a self-assessment tax return, which consists of accurate information regarding the income that is taxable in the UK.

The trustees of the SIPP are also necessitated to report some types of member payments such as when an individual takes a PCLS (Pension Commencement Lump Sum) or when they draw down their income.

Income – The income can be drawn by an individual starting at an age of 55 years or more and can be drawn from this SIPP until death.

Restrictions – Other types of pension schemes and various types of occupational schemes are easily transferred into a SIPP.

It is even possible to make cash contributions, anyhow, the tax relief is limited for the first five years of the residence period outside of the UK when the SIPP member is an expat, and at the same time, the lifetime allowance limit is also applicable.

To those who may not know, lifetime allowance is the maximum limit for the profits, which can be acquired from the UK registered pension scheme like a SIPP while not having to pay a lifetime allowance charge, which can be up to 55%.

In order to start a SIPP, an individual should be of an age under 75 years and must be a UK resident.

When there is no double taxation agreement in the country of the individual’s residence, then the income is taxed as per the UK tax rules.

A specific portion of this can be claimed as a tax credit if you are being taxed in the country of residence as well.

If the SIPP member dies before reaching the age of 75 years, the fund is to be distributed among the spouse or dependents of the member in a normal way, and this is subject to test regarding the lifetime allowance.

In case the death happens after the age of 75 years, then the taxes would be applicable as per the tax status of the beneficiary, and there won’t be a test regarding the lifetime allowance.

Pros of SIPPs:

• With the help of SIPPs, the members can invest in a wide range of underlying assets.

• Using SIPPs, members can transfer assets from other pension schemes as well.

• The costs involved with setting up a SIPP are comparatively lower than some QROPS.

• No inheritance tax upon the death of the SIPP member.

• A SIPP allows an individual to have the flexibility of having a UK pension, where the entire amount of the pension can be drawn down by the member if he/she thinks that it is necessary for them.

Even though it is possible to draw down the entire amount of pension, it is not considered to be a good idea because the whole purpose of a pension scheme is to obtain income during retirement.

Cons of SIPPs:

• Members of SIPPs are subject to taxes in the UK when there is no double taxation agreement in effect between the UK and the member’s country of residence.

• Members won’t be provided with the tax planning opportunities depending on the lifetime allowance or benefit crystallization events.

On the other hand, there are International SIPPs, which often share similar characteristics of a SIPP, yet they are particularly tailored for non-UK residents.

This means International SIPPs are a good choice for the people who live outside of the EEA region and wish to transfer their UK pensions while having access to a wide range of investment opportunities.

When provided by some offshore financial advisors, International SIPPs tend to have higher fees & charges than usual.

Bottom line:

It is common for some people to think that “Is it really necessary to go through all these hassles just for pensions?”. Well, the answer to your question without any second thought is that “It is definitely necessary”.

As we said at the beginning of this article, retirement planning is one of the crucial aspects of life and pension plans often play a very important role in that.

However, choosing the right type of pension or choosing the right jurisdiction might not be possible for most people.

It is definitely useful to acquire the help of a financial advisor concerning this matter, but how are you going to find an efficient financial planner?

Don’t worry, you are in the right place as we take care of all the financial needs of a person such as wealth management, financial planning, and investment advice.

To make it simple for you to understand, we provide all the services related to retirement planning such as

• Creating a diversified portfolio based on your investment goals, risk tolerance, age, etc., so that you can save more efficiently towards your retirement.

• Assist you in managing your portfolio so that you don’t have to spend your quality time managing all the aspects related to your investment.

• Assist you in choosing a pension plan that is suitable for your needs.

• Taking care of all your investment needs and manage your assets, especially if you are an individual having a higher net worth.

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That being said, we hope that you were able to find the information provided in this article to be useful.