SIPPs & QROPs | Services | Alexander Peter Wealth Management

What is a SIPP?

A SIPP is a self-invested personal pension plan. Which means it is a pension arrangement into which contributions are made by the member.

The benefits that will be received will depend on the level of contributions and the investment return. SIPP’s are a UK pension arrangement and as such are regulated by the FCA.

What is the difference between a SIPP and a Personal Pension?

A SIPP is a personal pension but with additional benefits. It allows for a wider range of investments which would include commercial property, shares and for more speculative investors find wines, vintage cars and other investments of these types. As a note of warning you should always be very careful of any advisor who recommends that all of your pension is invested into a single Unregulated high risk investment, as this is one of the indicators that you may be a victim of a pension scammer (for more information please see: how do pension scammers work).

There is also what is known as an international SIPP which will allow the funds within it to be held in the major foreign currencies, such as US Dollar, the Euro, the Australian dollar and the Canadian Dollar etc. This is particularly beneficial for expats who now reside in a different country.

SIPPS are often used by people who want to consolidate their pensions into one easy to manage plan. If you are considering doing this it is important to establish if your current pensions already have valuable benefits or guarantees that you would be giving up by moving them. Which is why taking expert advice is very important.

What is a QROPS?

QROP’s were introduced in 2006, they are foreign pension scheme that meet the standards of HM Revenue and Customs (HMRC). They allow British expats to take their pensions out of the UK to simplify their arrangements.

In order to make the HMRC list they must meet similar conditions to UK pensions principally that funds are not available before age 55 (to become age 57 in 2028).

What are the benefits of a QROPS

UK pensions pay their benefits in Sterling, QROPS offer the benefit of holding your pension in multiple currencies. This is particularly important when it comes to receiving benefits, as they can now be paid in the currency of the country where you live. This guarantees you an income where you know the amount you will receive instead of being open to currency fluctuations.

QROPS will provide you flexible access in how you take your pension benefits. You have the following options:

1) Withdrawal all the pension as a lump sum.
2) Withdrawal lump sums as and when you wish to.
3) Set up a regular income.
4) Or a combination of a regular income and being able to withdraw lump sums when you wish to.
(Please note that this is only from age 55)

If you have a large pension a QROPS will remove the effect of the lifetime allowance tax (LTA). This tax is charged on pensions whose funds are in excess of £1,073,000, this tax is charged at 55% on any lump sum taken or 25% on any income taken.
QROPS offer a wide range of investment choice to suit your circumstances, your appetite for risk, and your time horizon.
On your death, the funds in a QROPS will not form part of your estate, which means that your beneficiaries will not pay inheritance tax.
Once your pension benefits transfer to a QROPS they are no longer under the regulation of the UK. This means that your pensions will be paid free of any UK tax. However you will be taxed in your country of residence
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What are the disadvantages of a QROPS

QROPS are slightly more expensive than UK pensions in that they have an annual trustee fee which could be up to £1000pa.

Currently EU residents can transfer their UK pensions into an EU/EEA QROP’s free of UK tax, however if you live outside the EU any transfer will be subject to an overseas tax charge (OTC) of 25% unless you are able to transfer it to a QROPS established in your country of residence.

Should I transfer my pension?