Tuesday, May 26, 2020

SIPP Option For British Expats In Dubai

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International SIPPs can be ideal for British expats in Dubai who fear transferring their UK pension offshore due to the crippling 25% overseas transfer charge.

For expats outside Europe, QROPS offshore pensions are not a viable choice if the countries where they live have no QROPS provider unless they are ready to kiss goodbye to 25% of their retirement savings.

International SIPPs are a pension option because they come with features like QROPS but are exempt from the overseas transfer charge.

A SIPP works like a QROPS, offering a wider range of investments suitable for expats and comes with many of the same drawdown and tax features.

Dubai SIPPs – how they work

The difference is a SIPP is still subject to UK pension rules, so they come with some attractive benefits, such as:

  • A 25% tax-free lump sum
  • Access to the fund from the age of 55
  • Flexible drawdown in line with UK pension freedoms
  • A wide range of investments

Annual payments in are limited to a maximum of £40,000 – but for those earning upwards of £110,000 a year, these can taper to £10,000.

The fund size has a ceiling of £1 million that increases each year in line with inflation.

SIPPs are open to transfers from a QROPS, UK direct benefit and direct contribution pensions – but not public or civil service schemes.

Avoiding the overseas transfer charge in Dubai

To qualify, a retirement saver must be:

  • A British expat now tax resident in Dubai or elsewhere in the United Arab Emirates
  • A UAE resident who has UK pension savings who no longer lives in the UK

In both cases tax-relieved pension funds can be transferred.

The fund is outside of the reach of the British tax man for inheritance tax, which makes passing wealth from an unspent pension to loved ones easier.

The main benefit of a SIPP is exemption from the overseas transfer charge that wipes 25% off the value of a pension fund as a tax surcharge for moving money outside the UK.

Outside Europe, retirement savers must live in the same country as their QROPS is based to avoid the charge, unless they work for a few exempt organisations.

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