2 key considerations for clients looking to transfer an overseas pension scheme
You have recently read about the ways IPM can help clients who live overseas but still have UK pension benefits.
Often these individuals’ circumstances can mean they are left with benefits that are not easily accessible to them. Alternatively, the provider they are with does not offer the flexibility required to take into consideration any investment restrictions or reporting requirements for the country in which they reside.
These days it is not unusual for British nationals to travel the world for work, often building up wealth and benefits in countries outside of the UK.
This can often include pensions and, as their financial adviser, you can often be presented with issues when building a financial plan due to the various tax structures and regimes in other countries.
New pension regulations include steps to protect clients
Often, when the words “overseas” and “pensions” are put together, people think of the negative stories regarding overseas pensions. Understandably so; as FTAdviser reports, these can often be linked to pension scams and see significant client detriment.
The new pension transfer rules introduced in November 2021 include steps to protect clients in this area. If a pension provider can accommodate overseas investments, even if they are a well-established one, this will generate an amber flag.
An amber flag will see the transferring scheme taking steps to ensure the client is given time to consider the transfer further, including booking an appointment for them with Money Helper.
People are right to be cautious. However, similar to overseas clients who have built up UK pension benefits, there are occasions where UK citizens have legitimately accumulated overseas pension benefits and then returned to the UK to retire.
Whether the client can then bring these pension benefits to the UK is a question advisers and planners are asking us more regularly.
2 key considerations when clients ask us to accept a transfer from an overseas pension scheme
Transfers from overseas pension schemes are still something IPM approach with caution.
While we will assist where we can, we do not want to accept a transfer that will give either IPM or the client a problem in the future. Nor will we accept investments in-specie from overseas schemes that cause issues as far as the FCA’s non-standard asset rules are concerned.
As such, we will take our time on any transfer of this nature and will not proceed until we are fully satisfied. So, the number of transfers that actually complete on this basis is limited.
There are two key considerations for IPM when we are asked to look at this type of scenario:
- What is the client’s story? We need to understand why the client is asking us to accept the transfer and what the plan is for the SIPP should the transfer proceed. For example, we wouldn’t accept a request to accept a transfer from another country for an individual who is not resident in the UK.
- We need to understand more about the scheme we are being asked to accept a transfer from.
In 2017, the rules regarding overseas pension schemes in the eyes of HMRC changed. The full details of these are available on the government website and are beyond what we will cover in this article.
The key point here is to ensure that the scheme that IPM are accepting benefits from is a recognised overseas pension scheme (ROPS). You may have heard of the ROPS or qualifying recognised overseas pension scheme (QROPS) list issued by HMRC and listed on their website.
There are several criteria for an overseas scheme to be considered a ROPS. One of the most important is to ensure that the scheme is a legitimate pension scheme in the country in which it is based. In order to clarify this IPM will require either:
- Written confirmation from HMRC to the ceding scheme administrators that the scheme in question satisfies the ROPS or QROPS criteria, or
- Written confirmation from the relevant regulatory authorities in the country in which the scheme is based to the ceding scheme administrators that the scheme is an authorised pension scheme and satisfies the necessary criteria for this.
We will also need the ceding scheme administrators to confirm that:
- The scheme satisfies the relevant statutory instrument on requirements of overseas pension schemes
- The scheme’s trust deed and rules permit a transfer to a registered UK pension scheme.
We also need to understand how the transfer will be made. If it’s in cash, can this be made in GBP? If in-specie, what are the assets we are being asked to consider? These would need full assessment before we proceed further.
Once all the information is to hand, IPM will then be able to make a decision as to whether this is something we can assist with and establish a SIPP with a view to taking the transfer, if appropriate.
There is also one further requirement we have – that the administrators of the ceding scheme speak English!
We were once asked to consider an Italian scheme and when we first contacted the administrators to initiate our assessment it quickly became clear that they did not speak English and we did not speak Italian!
As you can imagine, on this occasion this was a scenario we were not able to assist with…
Get in touch
If you have overseas clients and would like to explore how the IPM SIPP could assist them, please get in touch. Email email@example.com or call 01438 747 151.