QROPS vs International SIPP – what’s changed?
In this video, I’m going to explain the latest changes to UK rules affecting the transfer of your pension to an international scheme. I’ll detail the changes, who it will affect, and what you can do about it if you live — or are planning to live — overseas.

Why QROPS used to be popular
In previous videos, I set out the benefits of transferring your UK pension to a QROPS (Qualifying Recognised Overseas Pension Scheme). Historically, QROPS was a good solution for those wishing to gain more freedoms with their pension, have a plan within the EU, negate the old Lifetime Allowance, and potentially gain more tax advantages as a non-UK resident.

However, over recent years those advantages have steadily been eroded away by successive UK governments — with what could possibly be the final nail in the coffin being hammered in with the October 2024 budget.

2017: the Overseas Transfer Charge (OTC)
For context, let’s step back to 2017, when Philip Hammond announced the introduction of the Overseas Transfer Charge, or OTC. The OTC is a 25% tax on the whole value of any pension being transferred out of the UK.

There were, however, some significant exemptions — the most important being: (A) if you plan to live in the same country as your QROPS provider, or (B) if you immigrated to the European Economic Area (EEA) and the QROPS provider was also in the EEA, then there was no OTC on transfer.

This worked very well for people moving to countries like Spain, because most QROPS providers were in Malta, and both jurisdictions were inside the EEA — so there was no OTC. It also functioned well due to multiple tax treaties between Malta and other EEA countries, meaning pension income was not taxed at source and benefits could be paid gross.

April 2024: Lifetime Allowance (LTA) abolished
The next big change affecting QROPS was the abolition of the Lifetime Allowance in April 2024. This chiefly affected larger pension pots approaching or above a million pounds. So for those with larger pensions, the advantage of negating the Lifetime Allowance by transferring to a QROPS had all but gone.

Furthermore — in what could be argued as a cruel twist of fate — HMRC then announced that any pension being transferred out of the UK with a value above £1,073,100 (i.e. the old Lifetime Allowance) would be subject to another restriction called the Overseas Transfer Allowance. How much would you pay on the excess? 25%.

October 2024: exemptions removed for many expats
Fast forward to October 2024, and among a raft of new measures announced in the UK budget was the removal of the EEA and Gibraltar exemption on QROPS transfers unless you plan to live in the same country as the QROPS provider.

In practical terms for mainland Europe, that means living in Malta or Gibraltar. Any other transfers of personal pensions will now be subject to the 25% Overseas Transfer Charge.

The alternative: International SIPP
Thankfully, there is still a pension meeting the needs of most expats — and truth be told, it has been the main solution for non-UK residents for a number of years: the International SIPP (Self-Invested Personal Pension).

With an International SIPP, your pension remains inside the UK, but it’s set up and administered specifically for expatriates and those with serious intentions of moving abroad. There are no issues with payments being made to banks outside the UK. You can access your pension in a fully flexible way and, with a little organisation, it can be possible to receive pension payments gross, free from UK income tax at source.

All of that whilst giving you peace of mind that your savings are still held in a UK regulated company subject to oversight from the Financial Conduct Authority.

Next steps
We think the International SIPP can be a fantastic solution for people living outside the UK. But keep in mind that pension transfers need careful planning, take considerable time, and require attention to detail. If you’d like more information, please get in touch and we can set up an initial consultation. Thanks for watching, and I’ll see you in the next one.