As previously explained in the first QROPS vs SIPPs article, the difference between these two pension options largely depends on where you are a tax resident, and your future plans.
If you live in Dubai but remain a resident of the UK for tax purposes, a Self-Invested Personal Pension (SIPP) allows you to not only consolidate your UK pensions, but invest your pot in a much wider range of asset classes than a traditional pension.
If, however, you are a resident of Dubai or the wider UAE, you may want to consolidate your pensions into a Qualified Recognised Overseas Pension Scheme (QROPS).
Which QROPS jurisdiction is best?
As the UAE is a tax-free economy, the Double Tax Agreements (DTA) it holds with other financial centres means you can elect to pay tax in the UAE – i.e. you don’t pay tax at all.
Of the possible options, Malta is the most preferable – being a respected, English-speaking financial hub with trusted QROPS providers.
However, even if you believe a Malta QROPS will be the best jurisdiction for your needs, it is important to consider that each provider offers schemes that can vary substantially.
Main areas where one QROPS can differ from the next include:
- Which asset classes you can invest in
- Whether your QROPS trustee (QROPS provider) can manage the investments on your behalf
- Whether there is a minimum transfer amount
- If your fund can be transferred to another QROPS at a later date (which may be useful if you move to a jurisdiction which does not have a DTA with Malta – please see below).
What happens if I leave Dubai?
As a SIPP is already based in the UK, you will suffer no adverse consequences if you return to the UK at any point.
If you own a QROPS and decide to return to the UK after ten years, your fund will also not suffer any adverse consequences. In fact, a QROPS can be an advantage, as it will only be liable to UK income tax on 90% of the fund.
In addition, if you decide to leave Dubai for another, non-UK jurisdiction and have a multijurisdictional QROPS, you can move your pension between countries as and when you need to – without incurring any additional fees
You should note, if you already have a SIPP, it is a relatively simple process to transfer your scheme into a QROPS – but as with all QROPS transfers, research must be completed to ascertain which QROPS jurisdiction is right for your needs.
The next step
Ultimately, these variables mean that the best pension option for you depends on your needs and future plans.
Therefore the need to consult with a regulated, independent financial advisor with experience in UK and UAE legislation is imperative.
This will ensure that a QROPS is in fact the optimum option for you, and the correct scheme and provider for your unique needs is chosen.
