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Self-Invested Personal Pensions (SIPPS) were introduced by the Finance Act 1989. They are a form of personal pension which allows the individual pension holder to decide how the contributions are invested.
Flexi-access drawdown (FAD) replaced the capped and flexible drawdown options for individuals setting up a new drawdown plan from 6 April 2015
With these freedoms there also came scandals – some of which still occur today.
Poor investment choices, 100% cashing out leaving people penniless with a lots more years to live and outright scams have seemingly plagued SIPPs.
The government has increasingly tried to curtail and protect people through an ever increasing amount of safeguarding, the most recent being introduced in November 2021.
Creating a new life outside the UK used to mean the go to tactic was to move the pension pot overseas for greater control and tax efficiency.
This move meant moving your pension to a QROPS which is short for qualifying recognized overseas pension scheme.
Since 2018 moving to a QROPS has largely been curtailed due to the government making a 25% tax charge applicable if the QROPS pension is not based in the same country as the member.
Considering that Malta is where the off-shore pension industry centres itself then it is only residents of Malta who could avoid this loss. Furthermore you would have to remain there for 5 years to completely avoid it.
If you have already moved your pension to a QROPS you also need to be mindful of a potential minefield imposed on the tax authority of your current host country.
Many European countries do not recognise Trusts. QROPS are typically created as a pension Trust.
These countries can be largely categorised as Civil law countries Austria, Belgium, Bulgaria, China, Czech Republic, Denmark, France, Germany, Greece, Italy, Latvia, Netherlands, Poland, Portugal, Russia, Spain and Switzerland.
Several jurisdictions are now introducing legislation specifically targeting the use of offshore trust arrangements and are not necessarily differentiating or exempting a personal pension trust. The legislation being introduced often requires detailed and onerous reporting of the interests and assets held within the trust to be declared to the relevant local tax authority in the individual’s country of residence which in turn results in additional charges being levied by the Trustees for the additional time spent and work involved in preparing and submitting the necessary reports. Failure to report and meet the deadlines to report can also often result in punitive charges being due on the member and/or Trustees.
As a contract based personal scheme does not utilize a trust.
I can help you change your existing QROPS arrangement.
For SIPPs, I will help you optimise and professionally manage the investment – this may mean a move to a specialized SIPP that’s geared to the needs of expat Clients and could save several potential tax mistakes.