What Happens to Your SIPP If You Leave the UK?

The Initial Reality

Thinking of life abroad? Here’s what happens to your UK pension when you leave the country.

In this blog, we’ll walk you through what stays the same, what might change, and the key considerations to be aware of,  helping you make confident decisions about your SIPP from overseas.

Firstly, normally speaking, nothing would directly happen to the SIPP when you leave the UK. It's not like when you go through passport control and a notification is sent to your provider in the UK that you're no longer part of the UK.

Would they know whether you got on holiday or whether you moved abroad? They obviously wouldn't know.

However, the majority of big brand UK providers do not now work with non-UK residents. This is going to become increasingly so with the new budget from Autumn 2024, which effectively makes UK pension assets form part of one's estate for inheritance tax planning purposes.

👉 To learn more in addition to this article, watch the video below or visit our YouTube Channel for expert-led insights on expat pensions and financial planning.

Currency Limitations in a UK-Based SIPP

A couple other things to consider, though. When you move abroad and you are to maintain your SIPP in the UK, a UK SIPP by definition has to be invested in GBP. You cannot have a currency – you can invest in the fund, for example the S&P 500 US denominated fund. You'd still be doing the currency exchange risk inside your SIPP.

The base plan has to be GBP. If you compare this to, let’s say, a non-UK resident SIPP that is set up and allows for non-UK residents, you could hold GBP, you could hold Euro, you could hold a dollar and some other major currencies as well. Or you could potentially do 50/50. You could split the 4,000 USD in GBP or Euro in GBP.

If you're trying to retire in Europe, or if you're not quite sure – are you going to France? Are you going to retire in America? Are you going to retire in Europe? Or actually, might you go back to the UK? The pull of grandchildren, healthcare, etc., can be a bit of a pull, particularly if you worked in America, you went there to try and earn more money.

The Hidden Inheritance Issues

However, there's also some very important unseen things about what happens to your SIPP when you leave the UK.

Now, if you leave the UK and your wife and family, or your husband and family, remain inside the UK and they are your beneficiaries, and your UK SIPP provider doesn't kick you out of your SIPP for being a non-UK resident, your partner, your spouse or whatever effectively could take on the SIPP.

If you were to die, they would have the option, like all other UK residents, to take over ownership of the SIPP, leave it invested, withdraw some of it down, withdraw all of it down, whatever they wanted to do with it. Hopefully, with your financial advice that you've introduced them to, they would have the full range of flexibility.

However, if you are moving abroad or you've already moved abroad with your partner, husband, spouse, kids, beneficiaries, whoever you've put as your beneficiaries in your SIPP, you probably have no idea. The official UK SIPP provider doesn't allow new applications from non-UK residents.

Your kids, your husband, your wife would not be able to have the same rights of taking over that SIPP and potentially keeping it invested for themselves for their own retirement.

So this is kind of an undisclosed thing.

“The SIPP provider may not even know that you've become a non-UK resident, and if they did, they’re not going to send you a disclaimer saying that the benefits of your SIPP just got less because you became a non-UK resident.”

Dominic James Murray,

CEO and Founder of Cameron James

Conflicts of Interest Among Providers

Now, I would say a conflict of interest exists here.

The SIPP providers in the UK make money from you having your assets under management with them,  whether it be through platform charges, fixed cost, or maybe you're invested in one of their underlying DFM portfolios of which they maybe have an agreement to have some type of remuneration through that.

So there's a potential conflict of interest to be advising people who actually, if you think about their round hole, you've now become a square and you don't really fit into the product anymore. But yeah, we'll just let them continue using it because we make good money from it.

But you need to be smart in that. You need to look at your own independent situation.

Real Cases of Inheritance Issues

What would happen if you died? What would the car crash be in terms of financial planning, of how your family would take over ownership of your SIPP?

And unfortunately, here at Cameron James, Jonathan's had a couple of these. There’s been some very high-profile cases we've worked on where beneficiaries living abroad came through to ask for advice and said, “Hey, my dad's just died. You know, we're taking over ownership. Is it 50/50? We’d both like to take over the SIPP. We don't want to be forced to sell it down and take income because we live in a very high income tax jurisdiction, and I'm currently at work.”

Sounds simple?

When we've gone to these older-school UK SIPP providers, they said:

“No, you can't do that. You can't open a new SIPP with this. It cannot be passed into your name because we do not work with UK resident clients. You will have to sell down the SIPP and take the cash.”

So some of them have faced massive tax bills because maybe they're in their 30s, 40s or 20s, whatever it is, they're doing well for themselves, they're earning money, they're in higher tax brackets. By having to take all of that money as income and drawdown, it's very, very expensive for them from a tax perspective and wasn't what their father would have wanted when he was passing on his million pounds SIPP.

He probably didn't know that his family was going to get smashed from a tax perspective.

Why Staying Might Not Be Smart

So it's really, really important.

It's the hidden things of moving abroad, whilst holding a UK SIPP.

“Just because you’ve been allowed to keep your UK SIPP as a non-UK resident doesn’t mean it’s the smartest thing to do from a financial planning perspective.”

— Dominic James Murray, CEO & Founder of Cameron James

And when we look at it in comparison, say the old-school model has always been a UK SIPP could be slightly cheaper than non-UK resident SIPP.

So, for example:

• AJ Bell: 20 basis points in the UK
  
• Comparable non-UK resident SIPP platform cost: maybe 30 basis points or whatever it might be
  

That’s starting to change in the industry now, though.

There are international SIPPs which are actually cheaper.

Book a Free SIPP Review

If you have any questions, if you're living abroad, if you're planning to move abroad, just get in touch, have a conversation with us.You can read online, you can look online about us. You don't have to take our advice, but we can put together a free recommendation report for any DC pension you have in the UK that you're potentially looking to transfer. And obviously, a SIPP by definition is a DC pension.

Key Takeaways ✅

• Your SIPP won’t auto-update your residency status, but restrictions may still apply
  
• UK providers rarely support non-UK resident beneficiaries
  
• Multi-currency flexibility is limited in UK-based SIPPs
  
• Inheriting a UK SIPP from abroad could trigger large tax bills
  
• International SIPPs may offer more flexibility, and may now be cheaper