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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

Written on 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 >

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