A SIPP is a tax-free wrapper for consolidating all of your UK pensions together in one place. SIPPs provide investors with greater flexibility and control than a standard UK company pension. SIPPs are the most common form of personal pension arrangement. SIPP transfers make up the majority of transfers from both Final Salary and Defined Contribution schemes.
An International SIPP (Self-Invested Personal Pension) is for non-UK residents who want to consolidate their UK pensions even if they no longer reside in the UK. Transferring to a SIPP affords them greater flexibility and control over their pension assets before and during your retirement. An International SIPP has the same tax treatment as a non-international SIPP.
Whether you are transferring a Defined Benefit pension into a SIPP or Defined Contribution pension into a SIPP, the physical process is relatively similar. You will complete the advice process with one of our Financial Advisers who will recommend the most suitable SIPP solution and underlying portfolio allocation. The critical difference is that a Final Salary Pension Transfer into a SIPP will require FCA sign-off is the transfer value exceeds £30,000. While a Defined Contribution Pension Transfer into a SIPP will not require FCA sign-off.
Transferring shares into a SIPP is classified as an ‘in-specie’ transfer, and tax relief provided to clients in the usual way. In-specie means transferring the ownership of an asset without converting it into cash first. An in-specie SIPP transfer can have advantages if you wish to not be out of the market on a specific asset. In-specie SIPP transfers are relatively uncommon. Capital Gains Tax may, however, apply to the transfer and independent tax advice should always be sort before completing any transfer of shares into a SIPP. In-specie SIPP transfers are relatively uncommon.
You and your Adviser have greater freedom to ensure your portfolio is in line with your attitude to risk and return. Flexibility helps you to stay in control of pension assets. For example, younger SIPP investors typically take a more aggressive outlook in their portfolio allocation as they have time to weather the storm and benefit from the long-term upward trend of equities. In contrast, investors approaching their retirement typically reduce their level of risk to lock-in their previous growth.
Within an International SIPP, you can withdraw money from your pension from Age 55 (57 from 2028). In a typical company pension, you cannot withdraw any pension until Age 60 or 65. The first 25% is tax-free (PCLS), and the remaining 75% is taxable at your marginal rate.
Consolidating your UK pensions allows you to view all your pensions together online 24/7. Simplicity not only reduces your letters, admin, and log-ins but also enables your Financial Adviser to make more accurate projections of your estimated pension income at retirement.
SIPPs provide a broader investment choice. Standard company pensions typically offer limited pre-packaged options with a handful of fund options. For example, they may purchase an ETF from Blackrock for 0.08% TER and rebrand it as an in-house fund with a TER of 1.00%. Within any International SIPP, we offer our clients access to over 2,000 funds with no mark-up on TER. The table below highlights the broader range of available assets.
Each UK pension has its charges. Hefty fees or bid-offer spreads are prevalent on older pensions. By consolidating your UK pensions, you eliminate duplicate costs and achieve economies of scale. Consolidation reduces your annual expenses and makes your pension benefits go further in your retirement.
The FCA regulates International SIPPs. So no matter your country of residence, you are still protected by the FCA. This is valuable for expats living in lesser regulated countries who still wish for oversight from the by the FCA on their investments.
You can move your portfolio to your money of retirement to protect yourself against currency fluctuations. For example, French residents may wish to hold their pension in Euro. This decision needs to be considered carefully though.
From Age 55, you decide how and when you wish to access the capital. For example, one year you may withdraw £10,000, the following year £0 and following year £30,000. How you take your pension income is your decision.
If you transfer a Final Salary pension to a SIPP, your existing safeguarded may be more valuable than the benefits of an International SIPP. In such an instance, you could be worse off by completing a SIPP transfer. A thorough review is required before a client can consider a transfer.
Some providers still charge up £500 pa with an initial set-up cost of up to £400. Five years ago this was the new norm, but competition has changed this. We ensure that our clients get the best value deals. We will shortly be writing an International SIPP cost comparison article. Should you wish to see this article when it is published, you can follow us on LinkedIn.
As mentioned, after 55th birthday, you are in control of when and how much you withdraw from your pension pot. In theory, you could withdraw all of your pension savings in your first year of retirement. So there is a danger you could reach later retirement with insufficient funds.
There are no restrictions on transferring your workplace pensions into a SIPP. You are free to consolidate all of your company pensions, work pensions and stakeholder pensions together. There are no SIPP transfer rules, so to speak of.
If you are considering transferring a Final Salary scheme into a SIPP, you need to assess if the transfer is in your best interest. We reserve the right to refuse Final Salary workplace pension transfers if we cannot evidence it is in your interest.
We are encouraged to swap utility or broadband providers for the best deal every time we watch the TV. However, few people realise you can do the same with your pensions. Many old UK pensions have high charges and hidden costs. Did you read p.27 of your pension contract from HR when you started each of your new jobs? It is unlikely you reviewed all the paperwork. You are not an IFA and were likely ready to celebrate your new employment.
Many older UK pensions have a bid-offer spread of between 2-5%. Bid-offer spread sounds like jargon. In simple terms, a bid-offer spread means that every time your UK pension rebalancing your portfolio by buying or selling the underlying holdings, you will incur a fee.
A platform investment provides more online accessibility including the ability to place trades online. This speeds up the process of buying and selling assets.
For example, if a UK pension reallocates £10,000 of your pension, you will be charged between £200-£500. They do not need to inform you of this charge as you have signed the T&Cs of the pension plan, even if this was 20 years ago.
At Cameron James, there is a 0% bid-offer spread on all International SIPP solutions we provide. Over the course of 10-years, such charges can have a significant impact on your eventual fund values. Being proactive and transferring away from outdated pension arrangements is an easy way to save yourself money.
During your consultation, our Adviser will complete a Letter of Authority with you. This document gives us the ability to email your pension providers to request all the relevant information (Transfer value, costs, charges, et al.). It is important to note; this does not give us the right to alter or transfer your pension.
We then analyse this information and include the findings in your advice report for you to make a more informed decision about your pensions. If you wish to transfer, you sign the advice letter. We then do everything from there, pre-completing all admin and paperwork on your behalf for you to check and approve.
Investment choice is one of the most significant advantages of a SIPP. Our role is to ensure the portfolio matches your attitude to risk. Attitude to risk sounds like industry jargon, what does it mean?
Your attitude to risk is how comfortable or uncomfortable you feel with short term market movements. Our Advisers assess this during your free consultation by asking you a range of hypothetical investment questions and how you would react. From this, we can determine your risk profile. Below is a simplified version to provide a general overview.
Clients with a lower appetite for risk are less comfortable with short market movements and prefer more consistent but smaller return. So we build their portfolio with a lower equity weighting. This approach means less exposure to the stock market.
In the middle, we have clients with a balanced appetite for risk. They wish to have stable returns but understand they can improve profits by taking a balanced level of risk over time. So we build their portfolio with a balanced equity weighting. This approach means less exposure to the stock market.
Clients with a higher appetite for risk are more comfortable with short term market movements to seek higher long term rewards. So we build their portfolio with a higher equity weighting. This approach means more exposure to the stock market.
Cash is extremely safe. The only problem with money is that it is standing still. Which is useful for short term purchases but not long term pensions. Eg. Prices in 2019 are 125.41% higher than in 1990 (Office of National Statistics). This inflation means that £100,000 in 1990 would need to have grown by 125.41% over the past 29 years or 4.32% pa to keep pace with the rising cost of living and inflation.
Stocks Markets have higher volatility compared to cash, but the long term upward trend of equities has a historical track record of producing much higher returns than cash. It ensures investors pensions grow and keep pace with the rising costs of living. Portfolio values can fall as well as rise though. Investing pension savings until a minimum age of 55, though, is a sufficient time to ride out any short term falls to end up with long term growth.
You contact your Adviser to advise the amount that you wish to take out. Your Adviser will communicate anything that you may need to know and send you the withdrawal form within 24hrs for you to sign.
The withdrawal will then be processed, and money will arrive in your bank account within 5-7 days. Please note if you have already used your 25% pension commencement lump sum (PCLS), you will pay tax on the remaining income.
QROPS – Qualifying Recognised Overseas Pension Scheme – is an overseas pension scheme typically used by expats living beyond the UK to consolidate their UK pensions assets. A QROPS must meet criteria outlined by HMRC.
Before the 9th March 2017, QROPS made up a substantial proportion of all UK pension transfers. Following the regulatory change in 2017 and the introduction of an Overseas Transfer Charge (OTC) of 25% for any members beyond the EEA, their popularity and suitability have reduced significantly.
If you are an EEA resident and the value of all your UK pensions is approaching your Lifetime Allowance of £1.055m, then you should read our QROPS Transfer page. A QROP transfer may allow you to mitigate your future tax liabilities.
The International SIPP market place has seen rapid growth as the number of UK expats living abroad increases. This growth means there is a frequent change in the best International SIPP provider as providers compete for client business. This competition is good for our clients as it is driving down fees.
The standard cost for an International SIPP used to be a £300 set-up fee and a £500 cost per annum. We now have access to an International SIPP provider offering a £0 set-up fee with a £180 cost per annum.
During your application process, you can choose one or more beneficiaries. Typically clients designate their spouse and or their children. There are no rules, however. You can nominate who you like, and this can also be changed as many times as you like. Furthermore, with Cameron James, there are no additional costs or exit penalties. Your policy will pass to your beneficiaries.
Our job would be easier if there were a one size fits all solution. It will depend on your situation and requirements. Everyone’s needs are different. For example, what may be the best advice for your colleague of a similar age may not be the best advice for you. Where you live, where you plan to retire, the value of your pensions and your attitude to risk are all determining factors.
Your pension pots are likely your most significant asset after your house, so taking advice from an experienced professional who specialises in this area is wise. Seeking qualified advice from an Independent Financial Adviser (IFA) is always the best course of action. Our IFA’s look forward to working with you and helping you find the best International SIPP for your requirements.
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