UAE – SIPPs and QROPS has become a key search term on websites and we thought we would look into this in more detail.
We undertook a little bit of research, with the assistance of our IT specialists, and we discovered that large numbers of British expats in the UAE were looking at websites focussing on SIPPs and QROPS.
UAE- SIPPs and QROPS searches led to the IT guys asking us for an opinion as to why this was the case and about the benefits of these products for people living in the UAE.
More importantly, the question they asked was “Why SIPPs and QROPS?” when they all have lower cost UK pensions themselves (Stakeholder/Auto-enrolment) that they see as the norm in the UK. These cost as little as 0.6% pa in total, with several funds to choose from. Were these low cost UK pensions not available to people moving or returning from the UAE ? For expats in the UAE- SIPPs and QROPS will be the only option discussed.
As I understand it, very few expats retire in the UAE and we have often questioned why so many were recommended to transfer UK pensions to QROPS, if the plan is to the return to the UK in the future. I suspect many that have QROPS in the UAE are probably now wondering why they transferred too, and possibly are looking for alternatives to their expensive (and as a result) underperforming pensions. Many now realising that they should not have been advised to transfer in the first place, or that a UK SIPP on a low cost platform would have been far better choice
Also, since the new QROPS rules make a transfer to a QROPS for a UAE resident a non-starter in many cases, expats may be searching the internet for alternatives.
Given that QROPS are now effectively ruled out, many UAE resident expats are being sold ‘ International SIPPs’ which are expensive and are still being sold with the same expensive insurance products, leaving the investors little better off than if they had been sold a QROPS.
The new DTA also demonstrates that a UK pension – either left in the original scheme or moved to a low cost SIPP platform- is governed by the tax agreement between the UK and the UAE and a QROPS would offer no benefits anyway.
All rather moot for those that have been sold a QROPS in the UAE, since we have already established that many will not be retiring in the UAE in the first place.
UK pensions for people living in the UAE
For those people with less than £100,000, they should be utilising low cost UK pensions and probably not SIPPs and absolutely not QROPS under any circumstances. The costs of a low cost UK pension are a fraction of the costs of both a QROPS and most SIPPs. For modest funds, the best advice is to consider a basic UK personal pension prior to either a QROPS and most SIPPs.
Why do you not hear of this better advice-based solution? Because the firms do not have agencies or contracts with a UK pension provider that allows them to recommend the low-cost option. Also, none of the low cost options pay any commission to the salesperson!
UAE- SIPPs and QROPS
If any expat thinks it is likely (I would suggest nearly all of them) that they will not retire in the UAE, and they have a QROPS or SIPP in an expensive insurance bond with poorly performing or failing funds, we can offer a Forensic Review to look at the best options going forward.
We offer a forensic review of the 10 reasons to use a QROPS for those that would like revisit the QROPS and investments they hold. Increased investment performance and lower charges may make a significant difference at retirement.
Even UAE firms that claim to be regulated in the UK are providing advice to expats that only consider expensive “International SIPPs” and QROPS – how do we know this? Because some of the expats that have been so advised end up coming to us seeking assistance on how to get out of products sold within them- such as insurance bonds with Friends Provident Life and RL360- insurance bond products that have no particular value in a pension and add cost and limit flexibility.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
This article was published on 23rd November 2017
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- QROPS and a Pension Returning to the UK- Part One- the Expat Returns
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- International SIPP versus SIPP review
- Tax Planning with SIPPs and the LTA
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