UK Private Pension - Brexit Issue

[SilkeT]

Dear All,
Here I am again with a question about a UK Private Pension. My husband (UK citizen, resident in Germany) is approaching retirement age. He has a SIPP with a UK pension provider. He was told today that the pension provider where his SIPP is held cannot provide him with an annuity or any other investment scheme to his residency in Germany, but he has to transfer his "pension pot" to a "Qualified Overseas Pensions Scheme Provider".
We are at a loss where to go from here. Are there any British Citizens, resident in Germany, who have had to go through this procedure and who can point us in a direction - where do we find these "Qualified Overseas Pensions Scheme Providers" or is there anyone out there who managed to find a UK based company that can provide annuities/ other investments for UK private pensions to non-UK residents post Brexit?
Many Thanks
Silke

[Fraufruit]

Have you read the other threads about SIPP? If not, just put it in the search bar.

[SilkeT]

Yes, I have. They all address the 2025 changes in tax law relating to SIPPs or a post from myself, which asked a different question. I cannot find any posts that deal with the question I asked here. If there is one, can you kindly point me to it? Thank you.

[SilkeT]

Have you read the other threads about SIPP? If not, just put it in the search bar.

Yes, I have. They all address the 2025 changes in tax law relating to SIPPs or a post from myself, which asked a different question. I cannot find any posts that deal with the question I asked here. If there is one, can you kindly point me to it? Thank you.

[Fraufruit]

You're welcome. Just wanted to make sure you weren't missing important information.

I feel for you people having to sort all of this out.

[yesterday]

I do not know much about this !!!

I just had a look at
https://www.cjfinance.co.uk/pension-tra ... %20SIPP%20(Self%2DInvested,before%20and%20during%20their%20retirement.

They seem to offer advice on what to do with SIPP for non residents.

As said I do not know much about it, but I would try to consult with many companies offering to help and maybe pick one, ofcourse its a risk

I got this info type doing a google search for "SIPP for non uk residents", which you can do as well.

There are many hits which talk over the options, try to look at at lot of them and see if there is a common way for how this situation is handled.

I wish you luck

[SilkeT]

I do not know much about this !!!

I just had a look at
https://www.cjfinance.co.uk/pension-tra ... %20SIPP%20(Self%2DInvested,before%20and%20during%20their%20retirement.

They seem to offer advice on what to do with SIPP for non residents.

As said I do not know much about it, but I would try to consult with many companies offering to help and maybe pick one, ofcourse its a risk

I got this info type doing a google search for "SIPP for non uk residents", which you can do as well.

There are many hits which talk over the options, try to look at at lot of them and see if there is a common way for how this situation is handled.

I wish you luck

Thank you for your efforts! Really appreciate it. There are indeed many companies that offer “advice” for the transfer of UK pensions abroad.

The issue I have is two fold:

1. Can we avoid having to transfer the pension and find a UK provider that offers annuities to non-UK residents?
2. If the answer to the above is no, who are the UK recognized providers in Germany? If we end up with a non-UK recognized providers, the financial (“penalty tax”) implications can wipe out a huge part of the pension pot.

[GaryC]

@millgor may be able to help as he has been through the process and ended up taking the whole pot as a lump sum, I think.

[sam]

The provider won't sell an annuity. I get that, they're not licensed to sell financial products in the EU.

You could look at a QROPS to Germany but then you'll have more German pension, rather than UK pension with UK personal allowance etc applying. If you can find a German provider that wants to take it.

Or another UK provider but maybe they're all in the same boat when it comes to selling annuities to non residents.

Cashing out is a possible option but brings all your UK tax in one year...

So ...

What about putting the UK pension into drawdown? The existing provider isn't selling a new product, and you can take income out while leaving the rest invested. There may be some charges though.

[SilkeT]

The provider won't sell an annuity. I get that, they're not licensed to sell financial products in the EU.

You could look at a QROPS to Germany but then you'll have more German pension, rather than UK pension with UK personal allowance etc applying. If you can find a German provider that wants to take it.

Or another UK provider but maybe they're all in the same boat when it comes to selling annuities to non residents.

Cashing out is a possible option but brings all your UK tax in one year...

So ...

What about putting the UK pension into drawdown? The existing provider isn't selling a new product, and you can take income out while leaving the rest invested. There may be some charges though.

Thank you for your suggestion!

The tax burden when taking it out in a lump sum is prohibitive - in relation to UK taxes and the effect of the Progressionsvorbehalt in Germany.
I was hoping that someone knows of UK providers who still offer annuities to non-UK residents.
As for putting it into drawdown, but it has two major drawbacks:
- one cannot rely on a stable annuity/ the pension funds remains subject to value fluctuations
- I had understood that at a certain age (75 years?) it is obligatory to take out an annuity, ie the problem I describe in this threat is only postponed, not resolved.

This all feels like a massive nightmare.

[sam]

1) one cannot rely on a stable annuity/ the pension funds remains subject to value fluctuations
2) I had understood that at a certain age (75 years?) it is obligatory to take out an annuity, ie the problem I describe in this threat is only postponed, not resolved.

1) is true and either an advantage or disadvantage of drawdown depending on whether annuity rates are good or keeping your money invested (in low risk things) is better.

2) This is no longer law. Went out with "pension freedoms". However in any event taking money out by drawdown does not mean you have to stagger it over your life like an annuity would. If your husband is coming up to 65 he could take 10% each year for ten years to get everything over to Germany by the time he's 75 if that's what's right for you. Would still stagger the impact on his/your joint Progressionsvorbehalt.

QROPS - just be careful googling it as there are "pension liberation" scammers who try to get people into schemes with super high fees etc. They may pay for search ads etc.

[mrloop]

In Germany the QROPS options are very limited - see https://www.gov.uk/guidance/check-the-r ... ies-g-to-i Of these, I understand that the Alte Leipziger is the only one open to the general public. Be very, very, careful there are lots of "advisers" who will try and sell you schemes in Malta or Cyprus which come with many strings (and costs attached).

I'm in a similar situation with a "stranded" pension fund in the UK - no annuity and only complete withdrawal or leaving as life insurance possible

[Kerfuffle]

I'm in a similar situation with a "stranded" pension fund in the UK - no annuity and only complete withdrawal or leaving as life insurance possible

Me too and none of the advisers I have spoken to, both in the UK and in Germany, have come back with anything useful. I may leave this to my children if I do not absolutely need the money in old age but this is not really what a pension is about....

[Andy P]

I can't help directly with the questions asked, but here is some general information (and personal opinions) about UK personal pensions, which may assist readers.

In general, you have the following retirement options with a UK personal pension:

1. Use the proceeds to buy an annuity
This provides a guaranteed income for your life (with the option of lower income but a minimum payment period).
The advantage is the guarantee, which includes "insurance" against living longer than expected.
The disadvantage is that they appear to offer very poor value for money - the funds are invested in current long-term interest rates, which are relatively low at present, and make assumptions about longevity, which reflect the fact that people who choose annuities expect to live a long time.
I'm unaware if there are any UK providers offering annuities to German residents, but it seems to be a problem.

2. Full or partial encashment
This takes your money out of the pensions area, and leaves you with the problem of converting into an income to fund retirement. There are potentially adverse taxation implications, which I discuss below.

3. Drawdown
This is essentially a managed form of partial encashment, whereby the income is regularly taken from the fund, leaving the rest invested.
It is very flexible, so that you can for example take more income when you need it and less when you don't.
A disadvantage is that if you live longer than expected, the funds can run out, so it needs to be carefully managed, and you need to start off conservatively, and be prepared to reduce income if necessary.
Any funds left over after your death will benefit your heirs.
The investment performance is likely to be better than an annuity, though this is not guaranteed, and for people with a reasonable sized fund and an understanding of the risks, I think this is a good option.

4. Transfer to another UK provider or QROPS
Transfer to another UK provider may be relevant if you can find one which offers an annuity or has a good drawdown offer.
I am personally very dubious about QROPS - a German one would offer a very poor annuity rate, and those in other countries are likely to be extremely expensive.

5. Leave it untouched
This isn't a solution if you need the money yourself!
The entire funds would pass to your heirs, but would be subject to inheritance tax in Germany (and also in future in the UK under recently announced changes). Payments to your heirs in the UK would be free of income tax if you die before age 75 or taxable as income otherwise. So in this latter case, tax is paid 3 times on the same funds!

Taxation of benefit payments
The key question is whether the UK or Germany has the taxation rights under the Double-Taxation Agreement.
The UK has the rights if contributions were paid to the pension for at least 15 years, otherwise it's taxable in Germany.

If the UK has the rights:
There is an entitlement to 25% tax-free.
You get the benefit of the UK personal allowance.
A full encashment is taxed as income in the year of payment.
Progressionsvorbehalt applies to your German income, which could be significant if you have other German income.

If Germany has the rights:
No tax is payable in the UK.
Everything is taxed as additional income in Germany, which for example could mean a very high rate if you fully cash in. In the case of a SIPP, taxation as income only applies since 1.1.2025 following the change in German tax rules.

In either case, it is likely to affect health insurance payments to the Kasse, if relevant.