Dissatisfaction over SIPP and SaSS shortcomings

The SIPP and SaSS pension market is in disarray after a series of upsets disclosed dissatisfaction among providers and advisers.

In three separate moves over the past few days, some shortcomings in SIPP and SASS pensions have become apparent:

  • Several providers have announced they will stop dealing with international advisers because they consider the compliance risks are too stressful
  • A poll of IFA advisers has revealed that SIPP investors with cash in their pension plan are receiving miserly interest rates of UK bank rate or less (0.5%)
  • Providers and advisers are calling for the Treasury to rewrite commercial property lending rules to let SIPPs investors borrow more than 50% loan-to-value

Overall, the announcements show how constrained a SIPP or SaSS is for pension investment in the UK.

More flexible options for British expats or international workers with UK pension rights would seem to be QROPS or QNUPS – both offshore pension schemes.

Both are pension schemes operate under a framework of HM Revenue and Customs approved rules in offshore tax jurisdictions – the Isle of Man QROPOS and Guernsey QROPS are popular with UK expats.

For investors looking at a mix of cash and equities, offshore pensions break the link between investments and Sterling by opening the door to other currencies.

Investment options give access to more markets and assets than a UK pension scheme as well.

For property investors, QNUPS provide options to invest in residential and commercial real estate.

Both offshore schemes are outside UK pension rules and are only open to non-residents with UK pension rights or those who are planning to move overseas within six months.

Hundreds of offshore pension providers offer almost 2,000 QROPS and QNUPS schemes in about 50 tax jurisdictions worldwide.

Pension funds in SIPP or SaSS schemes can be transferred in to offshore pensions with the help of independent financial consultants. Providers will not accept direct applications from investors.