SIPPs – What are they and why you should invest in them?

The ExpatRoute’s expert team is here to help you make sense of SIPPs and why you should invest in them to ensure you are well placed to make the most of your expat life.

What are SIPPs?

Self Invested Personal Pensions or SIPPs have become an increasingly popular choice for many investors and savers looking to enjoy a greater quality of life when living abroad after they have completed their careers.

The majority of SIPPs have grown in popularity due to the flexibility they offer British expats, hoping for a secure financial cushion to take advantage of when they retire.

Traditionally SIPPs were thought to be for wealthier investors with financial advice but this perspective has changed as SIPPs have become increasingly accessible and available.

What are the differences between SIPPs and standard pensions?

Traditional personal pensions only allow your investments to be managed within a select list of pension funds, most of which have been chosen by fund managers from a pension company.

However, with Expat SIPPs, you can choose your own investment vehicles and invest wherever you want. ‘Execution-only’ SIPPs offer total flexibility and will follow your instructions rather than providing you with any advice. If this sounds too daunting, then don’t worry – some SIPP providers will include extra support around where you place your money, but at an additional price.

What kinds of SIPP are available?

There are various kinds of SIPPs available to suit different types of investors at whatever stage of their lives or careers.


Low-cost SIPPs are thought to be traditionally more accessible and affordable. They may be free to set-up or involve only a small charge and offer low costs to buy or sell shares.


These products are aimed at investors with larger pension pots. You can take advantage of a wider choice of investments but there are higher fees involved for management and trading.

Most UK self invested personal pension funds in the UK offer a range of assets for investors to put their money in. They include but are not limited to:

• Investment Trusts
• Cash
• Unit Trusts
• Commercial Property
• Open Ended Investment Companies (OEICs)
• Stocks and shares
• Exchange Traded Funds (ETFs)
• Gilts and bonds

Who are SIPPs aimed at?

SIPPs are available to anyone under the age of 75. You can access any funds invested in them from the age of 55. From 2028, this age will rise to 57. However, if you don’t want to, then you can continue to save funds in your SIPP after this.

Typically, many of those who work in traditional jobs have the option of taking out a pension with their firm or company. If you have a workplace pension, then an employer often contributes to top up your fund meaning you are likely to prefer this retirement-planning option over a SIPP.

However, anyone working as self-employed, or a contractor will not have access to such a scheme. If you constantly change roles or work on a variety of projects, then you are likely to want a flexible account where you can consolidate your savings in one place without being tied to a particular firm, business or product. Using a SIPP helps you keep track of your finances, meaning it will be easier to manage and access when it comes to cashing in.

SIPPs also work for anyone aiming to hit a certain amount of financial savings by the time they reach retirement age and need to add to their pension pot to reach this sum. Alternatively, if you have maxed out your workplace pension and your employer is no longer matching your contributions, then you may also want to investigate the options of a SIPP.

What are the benefits of a SIPP?

As with other pensions, there are tax benefits to putting your money into a SIPP. Your investments will be able to grow without being reduced by any outgoings for income or capital gains tax.

You can also benefit from tax relief on any SIPP contributions you make from the government.

How does pension tax relief work?

The tax relief you get on your pension contributions depends on the amount of income tax you pay. The higher amounts you pay, the bigger the potential saving. It’s also worth remembering that any money you make from the value of your pension increasing is also tax-free.

The amount of tax relief you receive will depend on your income tax band.

Basic-rate taxpayers receive 20% tax relief

If you want to contribute £100 to your pension, this only costs you £80 with the government providing an additional £20.

Higher-rate taxpayers receive 40% tax relief

If you want to contribute £100 to your pension, then you will only need to pay £60. The government will add £40 to this.

Additional-rate taxpayers receive 45% tax relief

If you want to contribute £100 to your pension, then you only need to pay £55 into your pension. The government will add the remaining sum.

An Allow Allowance is in place to limit the amount you can invest into your SIPP.

This is capped at £40,000 per year or 100% of your wage, whichever is lower.

If you earn more than £240,000, your contributions are reduced at a rate of £1 for every £2 earned over £240,000. This is until the tax-free limit reaches £4,000.

Low-earners can contribute up to £3,600 per tax year and still receive basic-rate tax relief. Non-workers can pay in £2,880 per tax year with the government adding the extra £720. When it comes to withdrawing funds, you can usually take out as much as 25% without paying any tax. After that, it then becomes a taxable income.

Your SIPP can be passed on when you die

Many believe any savings contained in a pension will disappear when you die.

However, it is always worth checking the small print of any investments. Usually, any funds left in a SIPP can be passed to your beneficiaries without inheritance tax being applied.

If you pass before turning 75, then withdrawals will be tax free. If you were over 75, then any money taken from your pension will be subject to the beneficiaries’ income tax rate.

Withdrawing funds from your SIPP

From the age of 55, you can withdraw 25% of your SIPP tax-free. The other 75% will count towards your annual earnings and will be taxed depending on your income tax band.

You can remove funds in a variety of ways, whether it be as a lump sum or via instalments.

How do I manage a SIPP?

You can put different investments in SIPP and look after this yourself, providing total freedom to switch funds and investment vehicles whenever you want.

If this doesn’t feel right, then you can pay an authorised investment manager to take any financial decisions on your behalf.

Next steps

Choosing the best ways to invest your money to effectively prepare for the future can be a challenge. ExpatRoute is here to support you with the information you need to get started with your SIPP.

Contact a financial adviser today to learn more about SIPPs.

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