Sovereign’s market-leading ISIPP: The importance of following the Code

Individuals resident outside the UK have for many years been able to hold their UK pension funds within a UK Self Invested Personal Pension arrangement (SIPP). However, the attractiveness of the SIPP increased markedly in 2017 when HMRC introduced the 25% Overseas Transfer Charge (OTC) on funds transferred from UK-registered pension schemes to qualifying recognised overseas pension schemes (QROPS) outside the UK.

The OTC applies to all transfers to QROPS requested on or after 9 March 2017 unless, from the point of transfer, both the individual and the pension scheme are in the same country, both are within the European Economic Area (EEA) or the QROPS is provided by the individual’s employer.

In 2016 Sovereign introduced an International SIPP, known as the ISIPP, specifically to cater for individuals who wished to have control of their UK pension funds once they leave the UK. The ISIPP allows an individual to transfer and consolidate pension benefits from UK-registered pension schemes easily and efficiently and permits a wide range of investment choice for international clients and within the UK regulatory requirements.

With our international expertise and experience, Sovereign has established itself as a market leader in international pensions. This is not just as a consequence of our multi-jurisdictional capacity and the substantial investment we have made in our network, administration systems and infrastructure. It also reflects the rigorous approach that Sovereign has always taken in respect of regulatory compliance and our active participation in various industry bodies.

The UK pensions industry developed a voluntary Code of Good Practice in 2015 to combat the pension ‘liberation’ scams that have troubled the SIPP industry. Drawn up by a group of the key stakeholders in the industry, including trustees, administrators, legal advisers and insurers, the Code sets out the steps that should be taken to identify whether a receiving pension scheme is one to which a transfer payment should be made.

The Code has recently been updated and will shortly be reissued. Sovereign was a member of the working party that has developed, drafted and implemented the Code of Practice and fully supports its aims.

The Code references transfers to international SIPP products and the considerations a transferring trustee should make when assessing whether a transfer is in the best interest of their current pension member. It is essential that anyone considering a transfer to an international SIPP product should investigate and confirm the following:

  • How was the initial approach made to suggest the pension transfer? Was it via a ‘cold call’?
  • Is the ISIPP provider fully regulated by the UK FCA?
  • Where is the ISIPP provider based?
  • What track record does the ISIPP provider have in the international pensions industry?
  • Does the ISIPP provider adhere to and support the Pension Scams Industry Group Code of Practice?
  • Does the ISIPP provider operate a formal ‘Terms of Business’ regime with its introducers?
  • What due diligence information must any introducer provide to be ‘approved’?
  • Will the ISIPP provider only accept business from suitably licensed and regulated financial advisers?
  • Does the ISIPP provider “restrict” investments to “standard investments” under the FCA’s definition?
  • What investment information is made available to the member?
  • Has the transferring member received a full break down of all the member-borne charges, both the ISIPP fees, the investment fees, and the remuneration of their adviser in advance of transfer? Has the member signed off that they understand the impact of all charges on their pension value?

Sovereign has been active in the international retirement planning market since 2006 and provides personal pensions including QROPS, QNUPS, SIPPs and ISIPPs from its offices in Gibraltar, Guernsey, Isle of Man, Malta and the UK. We are fully licensed to act as trustee and retirement scheme administrator by local regulators in all the jurisdictions from which we operate.

To ensure the best possible customer outcomes for its clients, the ISIPP offered by Sovereign is prescriptive in terms of its minimum entry level and transparent in its pricing. It only permits investments that are within the UK Financial Conduct Authority’s (FCA) definition of standard investments – what most retail customers would usually invest in – and we also demand full transparency from our approved introducers as to the charges that they levy.

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