EU tax resident with UK / Jersey pension: “Should I transfer?”

This is a FAQ from many UK expats living in Europe as well as Europeans who have worked in the UK. The answer depends on number, type and value of pensions, type of transfer and investor objectives.

Considering both UK FCA regulated pensions and post 2006 Jersey based unregulated schemes, both can be transferred to Self-Invested Pension Plans (SIPPs) or Qualifying Regulated Overseas Pension Schemes (QROPS). The main difference between the two is that SIPPS are normally UK based (though can be considered international when multi-currency investment is available and the SIPP is designed for non-UK tax residents), while QROPS are based in a limited number of overseas jurisdictions, of these Malta being the only EU member state.

SIPPS are ideal when the investor wants to take a more active role in how their pension savings are invested. They provide a means to consolidate several pension schemes, taking advantage of management and cost economies. International SIPPs will accept transfers from post 2006 Jersey based schemes allowing investors to transfer from unregulated to regulated schemes, providing income and inheritance tax clarity amongst other advantages. As the UK has double taxation agreements (DTA’s) signed with EU countries then tax on benefits is normally only due in the EU country of residence. Transfer and consolidation take place in the UK, so the process is normally simpler and faster than QROPS transfers which require government agency approval to protect against scams.

QROPS allow the same consolidation and multi-currency investment flexibility as an International SIPP. The overriding reason to transfer to a QROPS is normally that the transfer is tested against the UK Lifetime Allowance charge (levied on combined pension pots greater than ￡1,073,100) and any further capital growth outside of the UK is not subject to this charge. Malta has signed DTA’s with all EU countries so again, tax is normally only due in the EU country of residence.????

In summary then, in the case of more modest pension pots, an International SIPP will normally meet EU tax residents’ requirements in terms of consolidation, multi-currency investment management and taxation. QROPS is a more effective product when the size of the pension pot is more significant.

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