SIPP (Self-Invested Personal Pension)

1. It makes them easier to review

   By combining your pensions together, you can more easily keep track of them and see how they’re performing. With one pension, you have complete visibility over your money. It is possible to make changes quickly, without having to contact multiple pension providers. You will only have to interact with one pension provider, saving you time, hassle and paperwork.

2. You can reduce your pension costs

   There’s a good chance that you will be able to reduce your pension costs by combining them together. All things being equal, the less you pay in charges the more you have for retirement.

3. Potential for improved investment performance

   How your pension is invested will determine how much it rises and falls in value. Some pensions only provide access to a few investment funds, which may not perform very well. Whereas more modern pensions can provide access to thousands of different investments. By consolidating your pension, you can increase the range of funds available to invest in. This gives you more choice and flexibility to choose an investment strategy that’s right for you.

4. More flexibility when it comes to retirement

   It used to be the case that when you reached retirement, you had to use your pension to purchase an annuity. The rules changed in 2015, allowing people to flexibly withdraw an income from their pension pot.

   Despite the rule change, some pensions are unable to facilitate flexible drawdown. This is because the pension was set up before 2015 when purchasing an annuity was the only option. Most people today flexibly withdraw an income from their pension. They are often shocked to learn that their pension provider cannot facilitate this.

   You may need to merge your old pensions into a newer pension if you want to take advantage of flexible drawdown. This is often a key reason why people consolidate their pensions.

1. You have a final salary pension

   If you have a final salary pension, then consolidating your pension may not be likely to be the best thing to do. Final salary pensions, otherwise known as ‘defined benefit pensions’, provide a guaranteed income for life. What’s more, this income tends to rise with inflation. These are very valuable benefits that will be lost if you consolidate your pension.

2. You have valuable guarantees

   Some pensions come with valuable guarantees. These include guaranteed annuity rates, protected tax-free cash or guaranteed minimum pensions. These are known as ‘safeguarded benefits’ and are typically lost if you consolidate your pension.

   You should check with your pension provider whether safeguarded benefits apply before combining your pension with another one.

3. Your pension receives employer-matched contributions

   If you’re an employee, your employer pays into your workplace pension. If this is the case, then you don’t want to transfer this pension to another pension – as you will lose the employer-matched contribution.

   You may be able to combine other pensions with this pension, however. You should check with your workplace pension provider to see if they will allow you to transfer in other pensions.

4. You will pay an exit fee when transferring away

   Some pensions will charge you an exit fee if you decide to transfer away. The exact amount and the terms under which a fee applies will vary between pension providers. This can reduce the benefit of consolidating your pensions, even if there is a cost-saving to doing so. You will need to compare the exit fee payable with the annual cost saving to determine if this makes sense.

Before combining your pensions together, you will want to check that you are not going to be worse off. The below summarises the key things you should check before consolidating your pensions:

• Valuable guarantees – make sure to check if your pension has any valuable guarantees (safeguarded benefits), as these will be lost if the pension is transferred.

• Investment costs – compare how much you currently pay in charges with how much you will pay once you have consolidated your pensions.

• Investment returns – check how your pension has performed over the last one, three and five years and compare this with the new pension.

• Investment range – check how many funds your current pension allows you to invest in and compare this with the new pension.

• Retirement options – check how you can withdraw an income at retirement, and whether your new pension provides flexible drawdown.

This is not an exhaustive list. You will need to weigh up the benefits and costs of consolidating your pensions to determine if it’s the right thing for you.

If you’re looking to combine your pensions together, we will need to contact your current pension providers and obtain a transfer quote. This will tell you the value of your pension for transfer and include any exit penalties.

We will then need to contact your new pension provider and request for them to transfer over your old pension. They will typically have a form that can either be completed online, over the phone or by post.

The new pension company will then contact your old pension company, requesting that they consolidate your old pension into your new one. This typically takes between four to eight weeks.

If you would like advice about pension consolidation, please contact us.

Withdrawals from your SIPP will normally be taxed in the UK. However, if your country of residence has a double taxation treaty with the UK, then in most instances the agreement allows your withdrawals to be paid without deduction of UK taxes.

If you are looking to take control of your UK pensions, HCM is designed especially for expatriates and non-UK residents. When you want to start making withdrawals, your UK qualified advisor will guide you through your options, in line with the relevant Double Taxation Agreement (DTA).

Double taxation agreements are signed between countries to avoid double taxation. The Double Taxation Convention entered into force between the UK and the UAE on 25 December 2016. The Convention took effect about taxes withheld at source, in respect of amounts paid or credited on or after 1 January 2017.

Under the UK “pension freedom” rules introduced in April 2015, savers aged 55 and older can flexibly access their benefits via their SIPP. This means they can choose how much or how little they take and when to take it. However, this will rise to 57 from April 2028.

With the DTA in force, this means that UAE residents may be able to take their money free of UK income tax, provided that they comply with temporary non-residency rules, designed to stop people avoiding tax by temporarily leaving the country. You typically must be resident abroad for at least five full tax years to qualify.

The normal minimum pension age (NMPA) will increase to age 57 on 6 April 2028. This increase to the NMPA was in the pipeline since 2014. There will be no phasing of its introduction. For those without a protected pension age, this means:

• Clients born before 6 April 1971 will be unaffected as they will have reached age 57 before the 6 April 2028.

• Clients born after 5 April 1973 will have the earliest date they can access their pension benefits delayed by two years.

• Clients born between 5 April 1971 and 5 April 1973 will have a window from their 55th birthday to 6 April 2028 to take benefits before the NMPA increases to 57. If they don't access their pension during this time, they will need to wait until their 57th birthday.

The first 25% of your SIPP will be tax free. With the remaining 75% liable to income tax. However, the DTA means individuals may be able to access the remaining 75% of their SIPP savings free from UK income tax when they make withdrawals in the UAE/GCC.

Disinvestment timing, considering alternative retirement income available, potential exit fees and other tax implications need to be considered, so regulated financial advice is of the utmost important here.

If you do decide you want to make a withdrawal over and above the 25% tax free amount this needs to be done in stages to fully be able to utilize the double taxation treaty.

• Apply to your pension provider/trustee to make a nominal withdrawal from your SIPP/Pension. This will officially go into income drawdown via your SIPP.

• The Pension scheme will make a nominal income payment to create a PAYE record, which will be logged with HMRC.

• You must then complete the HMRC Double Taxation Treaty Relief application ‘Form DT-Individual’, including the PAYE details of the pension scheme, and sends this to HMRC. Part of this form may need to be completed by the taxation authorities in the member’s country of residence. Our UK regulated advisors can assist you with this process.

• You will also need to apply in the UAE for proof of non-residency. You can usually do this by logging into the Ministry of Finance website and filling out the tax domicile certificate.

• The completed form along with your proof of non-residency needs to be sent to HMRC.

• Upon completion they will issue you with a NT code (No Tax) code.

• The pension scheme applies the NT tax code to future income payments with no income tax deduced at source. Once you have this code in place you are then able to make further withdrawals utilizing your NT code.

Our UK qualified advisors and UK tax team can assist with all the steps and the necessary HMRC filings. Simply contact us and speak to an expert.

Under the UK “pension freedom” rules introduced in April 2015, savers aged 55 and older can flexibly access their benefits via their SIPP. This means they can choose how much or how little they take and when to take it. However, this will rise to 57 from April 2028.

With the DTA in force, this means that UAE residents may be able to take their money free of UK income tax, provided that they comply with temporary non-residency rules, designed to stop people avoiding tax by temporarily leaving the country. You typically must be resident abroad for at least five full tax years to qualify.

It can be dangerous to empty your pension scheme in one go, unless you have other retirement funds, as you may be tempted to spend the money and leave nothing for your final years.

Cashflow planning can help with this. If you do not have any other forms of income or investments in retirement, it is unadvisable to cash in your pot in its entirety or take out large withdrawals unless you absolutely have to.