South Africa QROPS v SIPP FAQ


Here are a few of the most common questions, specific to those resident in the South Africa, that arise from those with UK pensions that are now living in South Africa. This page answers South Africa QROPS v SIPP FAQ (Frequently Asked Questions).

South Africa QROPS v SIPP FAQ No1 –  South Africa has QROPS listed on the HMRC list but there are restriction on currency and lump sum benefits. Take specialist advice and look at all the alternatives before moving to a South Africa QROPS.

It depends on whether it is offshore, onshore and whether it has been actioned prior to the 9 March 2017; post 9 March 2017 where UK pensions are sent to a QROPS in a different country from the recipient it is likely to result in the pension transfer to be taxed 25% on the full transfer.

So for an offshore QROPS it is a non-starter for most people.

For an onshore QROPS it is highly unlikely, because of the DTT and special provisions between the UK and South Africa. These pension provisions mean there is no tax due in the UK on British pensions if you remain resident in South Africa. Most QROPS actually increase the taxation due although clients are often not told about the UK special provisions, and are encouraged to transfer needlessly. However, some South African residents with existing funds have considered a QROPS and may need a review. To answer this requires specialist advice before a recommendation can be made.

The Double Taxation Agreement or Double Tax Treaty (DTT) between the UK and South Africa  is long established and the way a SIPP and other UK pensions are treated for tax by a resident in South Africa is also clear. Therefore, a UK pension transfer is allowable and no tax should be payable on transfer to a SIPP, and no UK tax will be due on accessing the SIPP if the correct special provision form has been completed.

NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE

South Africa QROPS v SIPP FAQ No2 – Gibraltar has no Double Tax Treaties and withholds 2.5% tax on income that cannot be reclaimed. Gibraltar offers little or no protection on funds or advice. For most people, especially those with funds of less than £250,000, then a UK pension is a better option that a Gibraltar QROPS.

Probably in most cases but not all. Are you planning on remaining a South African resident, otherwise you should be aware that any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer.

A SIPP is certainly as tax efficient if not more so, and is protected under the strict UK regulatory regime. However, very large UK pension funds (approaching £1 million) have to consider the Lifetime Allowance, that has additional tax considerations. Additionally, there will always be client specific circumstances that need to be considered . There is no “one size fits all”.

This question comes up as a result of expat advisers in South Africa, or product salesmen outside both Britain and South Africa, marketing UK pension transfers to QROPS usually in Gibraltar or Malta. In fact it is the third most South Africa QROPS v SIPP FAQ!

Beware of hidden commissions that are not declared to you, the client. Our view is that only an Advisor, regulated in both the UK and registered with the FSB , can advise on all the options in tandem with a South Africa tax adviser. Further, only a UK regulated adviser will have access to the full pension market to get the best deal for the client.

Most expat advisers are product salesmen looking to sell a QROPS as against give advice about the best options for a UK pension, and most of them have no UK qualifications and pretend to have access to a UK specialist firm producing a document which is worthless in terms of protection. Therefore, the answer to this question is a resounding “no”!

A popular question, and the answer is often “no”.

NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE

This South Africa QROPS v SIPP FAQ is linked to advice to transfer each and every UK pension to Gibraltar trustees with Royal London 360 investment bonds, also known as RL360, or STM Portfolio Bond or Investors Trust. We would strongly recommend you have this advice reviewed. In two cases we have come across we have had to reverse the pension transfer previously recommended and there were potentially large surrender penalties applied due to hidden commissions that were not declared to the client. We would like to highlight that this is no reflection on Gibraltar trustees or indeed on Royal London 360 ( RL360 )who had done nothing wrong. The fault was entirely at the door of the expat salesman who claimed they were registered in South Africa, but in fact were declaring that UK pension transfers did not come under the FSB registration and so in fact the business was being processed overseas outside of any UK or South Africa regulation.

Disclaimer

Aisa International is not licensed to give tax advice on pension transfer matters – nothing on this page or website should be construed as personal tax advice in South Africa but only as guidance on the questions you should be seeking answers to.

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