What can a SIPP invest in if you decide to retire in France? Our financial planning strategy is one of those areas that we all need to update, revise and modify from time to time wherever we live. As moving to another country means dealing with a new financial system, it makes sense to get to grips with what you can and cannot access in terms of SIPP investments.
Self-Invested Personal Pensions (SIPPs) are a form of Defined Contribution (DC) scheme which have become popular in the UK over the last ten years. Benefits include increased flexibility in terms of investment choices, whereby you can access a wide range of funds managed by different investment groups.
The International SIPP alternative
For those retiring to France, the International SIPP becomes an attractive option. Whilst UK SIPPs offer a wider range of investment options to traditional pension schemes, many are overly UK-centric. As a result, they are more often than not Sterling-based or hedged into Sterling. This is a potentially dangerous situation for expatriates, as currency movements can whittle away at investment returns simply due to a fall in the Sterling versus Euro exchange rate. Currency risk can be eliminated with an International SIPP, as investments can be made in either Euros only, or a variety of currencies.
What can a SIPP invest in?
The range of SIPP investments for consideration includes the following:
- Cash, cash funds and deposits
- Exchange-traded commodities
- Fixed-interest securities, including government and corporate bonds
- Shares registered on a recognised stock exchange.
- Regulated collective investment schemes including Unit Trusts, OEICs (Open Ended Investment Companies), mutual funds, SICAVs and investment trusts.
- Discretionary Fund Management agreements
- Physical Gold Bullion
- Real Estate Investment Trusts (REITS)
- National savings funds
- Alternative investments.
- Commercial property
Who should consider transferring to an International SIPP?
- Any expatriate who holds an ‘old-fashioned’ UK insurance-based personal pension plan with a limited choice of investment funds (or default ‘retirement strategies’) should consider transferring to an International SIPP. Pension situations can be improved by utilising the increased availability of funds and choice of currencies.
- Those who want to consolidate a series of small pensions into one easy-to-manage scheme.
- Anyone with a total pension pot which is unlikely ever to be worth more than the current Lifetime Allowance (LTA) of £1,073,100.
- Members of Defined Benefit (DB) schemes where safeguarded benefits are not important.
It should be noted that LTA taxation is levied at between 25 and 55% on pension pots worth over £1m. For those in danger of breaching the LTA limit, alternative solutions such as QROPS exist. However, for smaller pots or for those who don’t require pension benefit guarantees, SIPP investments are often a more appropriate option.
Caution should be exercised with DB transfers. Every individual’s circumstances are different; what might be right for one isn’t necessarily suitable for all. Examples include:
- People whose health is a problem
- Those with dependents who would not qualify for benefits on the death of the DB pension holder
- Those who have left the UK for good and don’t want the currency risk
- Independently wealthy individuals who want more control over the SIPP investments
How to find out whether a pension transfer is right for you?
There are several points for consideration when seeking to transfer a UK pension.
- In the first instance, it is essential to find an adviser with both UK and international experience. A lot of UK-only advisers choose not to work in the global pension transfer market, realising that they do not possess the level of local expertise required to provide holistic advice. An international adviser with a presence in France will be able to look at your overall situation and advise you accordingly.
- You will need to obtain valuations from your providers. This is the most obvious starting point and forms the basis of discussion and ultimate decision-making.
- You should examine your options thoroughly to ensure that you are making the right decision. No one can predict the future with any accuracy; you can, however, check various ‘what if?’ scenarios to ensure that you are in the best and most flexible position.
Sometimes, not transferring your pension may be the best option. As always, you should review your strategy regularly.
Feel free to contact us for advice via our online form, or by telephone on + 00 33 (0)1 39 70 98 54