Have clients who have moved abroad? Here’s how we can help

With the BBC reporting that 5.5 million Brits permanently live overseas, many of you will look after clients who have moved abroad.

Many more of you will have clients with plans to retire abroad once they finished work. And, it is not uncommon for people to take secondments in other countries as part of their job, building up pension benefits as they go (ignoring the present restrictions, of course!)

If you have overseas clients, how many of these have UK pension benefits that you still look after for them? Have you considered how your clients will access their pension commencement lump sum and/or income when the time comes?

We’ve previously looked at the common types of property your clients can hold in a SIPP and the ways in which we can add value to your SIPP clients.

SIPPs are also well known for the flexibility they offer to clients. Combining the flexibility in terms of investments and how benefits are paid can provide an innovative solution for those clients no longer residing in the UK.

Helping clients who live overseas

IPM have clients that live all over the world. Most of the overseas clients we have live in Europe or the United States, although we do have clients who reside in places as far afield as Thailand, Hong Kong and the UAE.

Clients who are in the accumulation phase of their pension and not taking benefits may be happy to continue to run their SIPP in GBP. However, there is an opportunity to run the SIPP in any other currency they wish, which can make sense for clients who now live abroad.

While all reporting to both a client and HMRC from the SIPP provider must be in GBP, the investments can be held in the currency of the country in which your client resides.

The key is to work with an investment house that can hold multi-currency investments within the SIPP. As IPM don’t operate a panel of investment houses from which your clients must select, you retain the opportunity to work with a firm that can meet your client’s requirements (subject to our usual assessment criteria).

Initially, any investments held within the SIPP will be GBP denominated. To have this converted to the currency of your client’s residence, you will either need to liaise with the investment house directly or, if this is not possible, work with a specialist currency conversion firm. This affords you and your client the ability to convert the GBP when you wish and at a rate acceptable to you.

Once your client is in this position, if they then wish to take their pension commencement lump sum from their SIPP, this will usually mean converting their investments back into GBP. The SIPP provider would pay out the lump sum in GBP, and the client would have to convert back to their local currency so that they can spend it.

Not only is this an onerous process, it can also be expensive for clients given the costs involved in currency conversion.

Where IPM can assist is by paying out the lump sum in the currency in which the SIPP is held.

Instead of converting the investments back to GBP, we can open a bank account for the currency in question within the SIPP (subject to availability) and pay the proceeds into this account.

We will then carry out the benefit crystallisation event in the usual way, carrying out the calculations and reporting in GBP, before making the payment to the client’s bank account.

Note that for income payments in non-GBP currencies we would look to pay these on frequencies less than monthly. Also, our preference is that clients have an NT tax code – as all tax would need to be paid in GBP this avoids complications in regards to conversion.

Some important points to remember:

• IPM are not tax experts. We strongly advise that independent tax advice is taken as to how the UK pension benefits and any withdrawals from the SIPP will be treated in other countries
• In some countries, UK pension benefits may need to be reported to the local tax authorities and, in some cases, tax may be due. We strongly recommend that clients seek specialist tax advice in the country in which they reside to see what implications, if any, there are for their UK pension
• The above is subject to the services required being made available by third-party investment houses and banks
• Payments in non-GBP are subject to additional one-off IPM charges.

One of the most common scenarios we are involved with in this area is where a client has a US connection. Given the complexities surrounding US clients, we have produced a case study which you may find useful.

Get in touch

If you want to have a chat about the potential of SIPPs for your overseas clients, or any other aspects of pension planning, please contact us. Email info@ipm-pensions.co.uk or call 01438 747 151.