How our SIPP can really add value if you have overseas pension clients

According to recent statistics from iexpats, there are more than 5.5 million Brits living outside the UK, with this number increasing by approximately 8,000 a month. Similarly, there are many overseas nationals who will have spent some time working in the UK.

The link between these individuals is that it is likely they will have private pension provision from time spent working in the UK. This will still be the case if they relocate from the UK to live in another country.

As their adviser, you could be left with a headache as to the options available to your client:

  • Is the current provider happy to have a client that is not UK-resident? We often hear of clients being asked to change pension providers because they now live abroad
  • How will benefits be paid from the pension in the future? Can payments be made to an overseas bank account?
  • Will the investments on offer with the current pension provider lend themselves to the client’s new circumstances?

IPM is used to dealing with clients all over the world, from Europe to Asia, Australia, and South America.

We also have a good understanding of the specific needs of clients who are either living in the US or are required to carry out US tax reporting, as their UK pension benefits will need to be taken into consideration. In some instances, these clients had been with IPM for several years before deciding to relocate to somewhere else in the world.

We also have wide experience of setting up SIPPs for clients who are not living in the UK at the time we receive their application but have accumulated UK pension benefits previously. Often an adviser is looking to consolidate these, or the current provider is unable to continue servicing them.

It is important to stress that we don’t work with overseas, non-FCA regulated introducers. The work we do in this area is the same as any other SIPP we establish, with the difference here the flexibility our SIPP offers can solve problems for both clients and their advisers in these circumstances.

Additionally, we’re not experts or specialists in the tax laws or legislation of other countries. Depending on the country the client has a connection with:

  • UK pension benefits may have to be reported on a regular basis
  • Tax may need to be paid on holding UK pension benefits
  • The tax treatment on distributions from a UK pension may have an impact on an individual’s tax status in another country.

Advisers should seek specialist tax advice on these areas if they are unsure.

Paying pension benefits in another currency can be beneficial for many clients

Where clients are in the accumulation phase of their pension, running the SIPP in GBP is not normally an issue.

However, where a client lives abroad and is looking to take benefits from a SIPP, then an option for this to be paid in another currency may be beneficial. At IPM we are happy to consider paying benefits in either EUR or USD, subject to certain conditions being satisfied.

The key to making this work is having an investment house within the SIPP that can hold multi-currency assets.

As IPM does not have panels of investment houses you must select from for your clients, you can work with the most suitable firm for your client’s circumstances. This can also include firms that specialise in portfolios for clients who have additional needs to take into consideration, for example US clients.

While all monies received into the SIPP and reporting by IPM is done in GBP, if a client wanted to run a EUR denominated portfolio with their chosen investment house, SIPP monies can be paid to the investment house in GBP, and they can then convert these into EUR for investment.

If your client lives in a country which uses EUR and they want to take their pension commencement lump sum (PCLS), for example, subject to certain criteria IPM could arrange to pay that lump sum in EUR directly to the client’s bank account.

This is opposed to converting the money back from EUR to GBP at the investment house to then be returned to the SIPP’s trustee bank account, when the SIPP provider then pays GBP to the client who then has to convert back to EUR to spend it. Not only is this more convenient, but also saves additional costs in currency transactions and risks in terms of exchange rates.

Here’s an example to illustrate how IPM can help your overseas clients

You have a client who is retiring from work and is planning to relocate to the south of France. The client has built up significant pension provision in the UK and will look to this to fund their retirement.

As France is in the eurozone, running their pension in EUR and having pension benefits paid in EUR is appealing to the client.

The pension benefits are held with several different insurance companies, which can be consolidated into a SIPP with IPM. These are received in GBP and held in the trustee bank account until further instructions are received.

We then establish an account within the SIPP with a platform that can run EUR-denominated portfolios. IPM is then instructed to transfer the GBP to the investment house before a conversion takes place into EUR.  Ideally, this is done by the client with the investment house directly to ensure this is completed at a rate they are agreeable to.

The investments are run in accordance with the client’s mandate until such time as the client indicates that they wish to take their PCLS. The benefit crystallisation event takes place in GBP, however using the Bank of England spot rate the amount payable is calculated in EUR*.

Sufficient EUR is then returned from the investment house to the EUR trustee bank account IPM has established in the SIPP. Once the client’s personal account details have been verified, IPM will then make the PCLS payment to the client in EUR.

Some other points to remember:

  • While the PCLS is tax-free in the UK, this may not be the case in France. The client should seek specialist tax advice in this regard.
  • Ongoing income can also look to be paid in EUR. However, this is offered by IPM on a less frequent basis than GBP payments (biannual and annual).
  • Where possible, IPM would always prefer a client to have an NT (no tax) code in the UK for income payments made from the SIPP.
  • Non-GBP payments can be subject to additional charges from IPM and Metro Bank, IPM’s trustee bank account provider.

Get in touch

If you want to have a chat about the potential of SIPPs for your overseas clients, or any other aspects of pension planning, please contact us. Email or call 01438 747 151.

*to allow for currency fluctuations, an amount slightly under the maximum may be paid in EUR.

Get in touch

Whether it’s a question about a specific client or SIPPs in general, we are here to help. Call us on 01438 747 151, email or complete the form below:

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