ROPS vs SIPP: How do the two main expat pension options compare?
Discover the major differences between a ROPS and a SIPP before getting advice on which pension scheme is more suitable for you
Last reviewed/updated 5 July 2023
Recent changes to UK pensions, such as removing the need to purchase an annuity and the abolition of the 55% "pension death tax" and the removal of the lifetime allowance have meant ROPS and SIPPs are now more similar than ever. However, for people living outside the UK, a ROPS can still offer a few advantages over a SIPP.
Below we have brought together the key questions which are most common when discussing ROPS and SIPPs to enable you to understand the key differences in plain, simple English.
As always, before you make a decision about any financial product you must seek independent advice.
ROPS vs SIPP: The basics
The following table outlines the basics of how a ROPS and a SIPP compare.
| ROPS (Formerly QROPS) | SIPP | |
|---|---|---|
| Full name | Recognised Overseas Pension Scheme | Self-Invested Personal Pension |
| Jurisdiction | Can be held in a tax advantageous jurisdiction outside the UK | Always resides in the UK |
| Year introduced | 2006 | 1989 |
| Regulated by | Local regulator where the ROPS is held, not the FCA | FCA in the UK |
| Country of residence for qualification | Anywhere | Anywhere |
| Annuities | No requirement to purchase an annuity | No requirement to purchase an annuity |
| Lifetime allowance | From April 2024 no lifetime allowance limits (before April 6th 2023 a lifetime allowance charge of up to 55% was levied on pensions over £1,073,100) | No lifetime allowance limit |
| Cost | Fully dependent on the size of fund, your adviser will advise on any costs. | |
| Currency options | Will depend on the ROPS, but you will have a choice of currency | £GBP |
| What if you return to the UK? | If you keep the pension when you return, it will be treated as though it was a SIPP. But you may be able to transfer it to an alternative scheme. You should always seek advice before returning to the UK. | Nothing changes. |
ROPS vs SIPP: Income options
This table compares how you are able to receive your pension as an income both before and after you retire.
| ROPS | SIPP | |
|---|---|---|
| Before retirement | Up to 30% pension commencement lump sum free from UK tax from the age of 55 (and in some cases as early as 50). Tax may be due in the country of residence. | 25% lump sum free from UK tax after you reach 55. Tax may be due in the country of residence. |
| Before age 75 | Income drawdown | Income can now be based on GAD rates or, where applicable, flexible drawdown. |
| After age 75 | Income draw-down continues | No change |
| Income tax | If you live outside of the UK, there is no UK income tax but you will be subject to local income tax where you live | |
ROPS vs SIPP: What happens when you die
This table compares what happens to your remaining pension funds when you die.
| ROPS | SIPP | |
|---|---|---|
| Inheritance tax | Not subject to UK inheritance tax (IHT) | |
| Penalties | No penalties. 100% is passed to your surviving partner or other beneficiaries (thanks to the abolition of the pension death tax on the 29th September 2014) | |
Making the decision between a ROPS and a SIPP
If you are not resident in the UK you will have presumably considered a ROPS at some stage, which is perfectly understandable given the changes to the pension system.
One key difference between the two is the quality of advice you may get when making your decision and it is important to remember that not all financial advisers are qualified or able to recommend a SIPP due to not being regulated in the UK.
Speak to an expat pensions specialist to clarify your options
If you are unsure about the differences between ROPS and SIPPs - or any other pension matters we can help you by introduction you to a trusted expat pensions and retirement specialist.
As part of our introduction service you will be offered an initial free consultation during which our partner will answer any questions and provide impartial assistance which will enable you to:
- Understand the benefits and avoid the potential pitfalls of various pension options
- Investigate all the options available to you as an expat or UK resident
- Clarify any costs, commissions or fees which you are unsure about
- Get a second opinion about any advice you may have received
At no time will you be pressured into making any decision, neither will you be under any obligation to proceed with any advice. Once you've entered your details, we will evaluate your enquiry before confirming the details of our hand-picked partner who will then get in touch with you directly.
Following the initial consultation, if you need further assistance or advice, our partner will propose next steps with all potential fees explained leaving you free to decide whether to proceed or not.
Request your free introduction to an expat pensions specialist >
Testimonials from people who have used this pension advisor introduction service
I was extremely dubious and cautious going into this process. I have two pension pots in the UK that l have been trying to consolidate and rebalance for over a year with nothing but stalling and red tape from the two companies in the UK.
In desperation l followed up a lead from Google. I am glad l did. I will now be able to manage MY money from the US with an engaged and informative partner, instead of dealing with people who have zero interest in growing my accounts.
It’s a big relief and l look forward to developing this relationship wrt the rest of my retirement planning as part of my portfolio. Thanks so much for your help and referral. This is a legitimate organization with the expertise and support expats need.
Joanne E. United States, Pensions
I found the session with the consultant to be very helpful in that it helped allay any concerns I had around my choice to manage my pension post-Brexit. I really valued the opportunity to be able to discuss what I was planning with an someone who could give an independent perspective.
Carl P. Spain, Pensions and Brexit
Contact was fast. Initial consultation was informative and helpful. The consultant was very personable, listened to my questions and was thoughtful and thorough in his responses. In a forum such as this, the consultant must convince the client that they are trustworthy and knowledgeable; The consultant I spoke with did that!
Lucy P. United States, Pensions
Request free introduction to a pensions and retirement planning expert
Our free introduction service will connect you with a hand-picked independent financial advisor that can assist you with pensions and retirement planning for expats.
Once you have made your request, you will get:
- Free initial consultation to discuss your situation and have your general questions answered.
- Free, informal guidance on the options available to you.
- Overview of any fees and charges should you wish to engage the advisor.
Request free introduction to a pensions and retirement planning expert
Our free introduction service will connect you with a hand-picked independent financial advisor that can assist you with pensions and retirement planning for expats.
Once you have made your request, you will get:
- Free initial consultation to discuss your situation and have your general questions answered.
- Free, informal guidance on the options available to you.
- Overview of any fees and charges should you wish to engage the advisor.