QROPS OR SIPP – WHICH OPTION IS BEST FOR YOUR UK PENSION ?
Given the impending changes in UK pensions law to be introduced by the Coalition government this is a good opportunity to revisit the relative merits of using a UK Self Invested Personal Pension (SIPP) or a QROPS as a long term home for UK pension fund.
Why not leave it where it is?
This is the first question you may well ask. Well the answer to that one depends on where your UK private pension is currently held. If it’s a deferred (or “frozen”) pension in a final salary pension scheme the awaited new UK legislation will reduce the current “transfer value” by typically 10% to 30%. So if you know that the value of something is going to fall then surely now is the time to do something about it.
Do you know how much your fund is worth how it is invested?
If your UK pension is with a UK insurance company can you answer these two questions? If the answer to at least one of these questions is “no”, then you need to consider what you have and compare it to what is available – namely SIPPS and QROPS. As pensions experts first and foremost we can gather all this information for you and provide you with our free no obligation review.
The key differences between a SIPP and a QROPS for a non UK resident include:
- A SIPP will generally be a lower cost option than a QROPS.
- A SIPP will provide fewer investment options than a QROPS.
- Upon your death, QROPS always allow the remaining funds to be passed on tax free to your named beneficiaries.
- With a SIPP, any remaining funds upon death passed onto your beneficiaries attract a penal tax charge of 82 percent (soon to be reduced to 55 percent).
- A SIPP restricts you to a single chance of taking a lump sum of 25% of the fund. New rules from April 2011 may allow you to take more as a lump sum but it will be taxed.
- A QROPS can allow you to take up to 100% of the fund as a lump sum if you have been out of the UK for at least five complete tax years.
- Income when drawn from a SIPP will be fully taxed here in Spain.
- Income when drawn from a QROPS will for a Spanish resident be taxed at no more than 2.6%, and this can be as low as 1.5%.
You will begin to see how it is that the extra cost of a QROPS is well worth it on consideration of the advantages that are delivered. But above all a QROPS takes you outside UK legislation once and for all and away from the risks associated with the ongoing meddling underway by the UK authorities.
The importance of advice from pensions specialists
For a free no cost (with no upfront fees) review of your pension fund from a leading QROPS and QNUPS independent pensions advisory firm please contact review@qrops.es or see http://www.qrops.es or http://www.qropsguernsey.com
