QROPS Vs SIPP
QROPS Income Vs SIPP Income. Transfer your pension to a QROPS if you want to reduce currency risk and get your pension out of the UK tax net. If you are permanently moving abroad, you may wish to remove your pension from the UK tax system. That way, future tax changes won’t affect your pension income.
Furthermore, if you are moving to the EU, you may want to get your pension out of the UK before Brexit and transfer your pension into an EU QROPS which is reinvested into EUR into European regulated funds under EU MiFID regulations. Your European QROPS will be paid out in EUR into your local bank account at retirement.
You can choose the beneficiaries of your pension scheme, so your may want to include new partners or new partner’s children, for example.
100% gets paid out as a cash lump sum upon death to your named beneficiaries.
QROPS used to have many more advantages over a UK SIPP, but the UK government have slowed chipped away at the advantages of a QROPS over the years whilst increasing pension flexibility to keep tax money from flowing out of the UK tax system.
You can see more on the history of QROPS here.
QROPS vs SIPP Table
In the table below, we explore the difference between the UK’s most popular SIPP, Hargreaves Landsdown with an Isle of Man SIPP and a QROPS in Malta.
| Hargreaves Landsdown
|Isle of Man
|Countries Accepted||Must be EEA or UK resident||Any Country||EEA Only*|
|Range of Funds||Limited||Open Architecture||Open Architecture|
|Currency||GBP only||GBP, EUR or USD||GBP, EUR or USD|
|Financial Adviser||Not Included||Needs Adviser Attached||Needs Adviser Attached|
|Self Dealing||Yes||No, but self-directed ok||No, but self-directed ok|
|Tax on death||Up to 45% after age 75||Up to 45% after age 75||0% tax on death|
|Income tax at source||up to 45% if no DTA||up to 45% if no DTA|| 0% in Malta if DTA; up to 35% if
|Platform Fees||< 0.45% p.a.||< 1% p.a.||< 1% p.a.|
|Phone Dealing||1% of value of trade||Approx. 25 GBP||Approx. 25 GBP|
|Minimum Pension Age||55||55||55|
|Lump Sum (PCLS)||25%||25%||30%|
|Lifetime Contribution Limit||1m GBP||No Limit||No Limit|
|Double Taxation Agreements||133||133||71|
*there is a 25% exit tax if you move to a QROPS in Malta and do not live in the EEA. There is also a 25% retrospective exit tax if you move out of the EEA in the subsequent 5 years following a pension transfer.
Please click here to see the QROPS comparisons & the difference between pension transfers to QROPS in Australia, Gibraltar, India, the Isle of Man, Malta & New Zealand.
HL SIPP Vs Isle of Man SIPP
The main difference is most UK SIPPs are now self-execution in the UK, i.e. self-dealing. There is no adviser attached. You have to figure out your own risk tolerance and take a best guess at which funds to invest in.
Also, a HL SIPP can only be set up if you are a resident of the UK or EEA, although that may change with Brexit.
An Isle of Man SIPP can be set up from anywhere and can be set up in GBP, EUR or USD. Most Isle of Man SIPPs requires a financial adviser be attached to give advice. It is set up specifically with British expats in mind.
QROPS Vs SIPP Benefits
- it gets your pension out of the UK tax net, useful with the UK leaving the European Union
- You can transfer your pension into EUR or USD which will make your retirement benefits more stable & less prone to exchange rate movements
- there is no maximum on the lifetime contributions to a QROPS and there is a Crystellisation Benefit Event (CBE) which means there can be no tax on growth of the QROPS following the transfer. The purpose of the BCE is to determine the value of the benefit that is being crystallised, which is then tested against the remainder of the individual’s lifetime allowance (LTA).
- 100% gets passed as a cash lump sum on tax-free to your chosen beneficiaries, making a QROPS an ideal inheritance tax planning tool
- A SIPP gets taxed at 45% on lump sums left after age 75 or at the beneficiaries highest rate of income tax if they take it as an income
- You can pass on your pension to new partners or beneficiaries
Please send us a message if you want to speak to an expert.QROPS VS SIPP. Which Pays the Best Pension Income? by Richard Malpass