QROPS vs SIPPS: Differences and Similarities

Are you trying to manage your UK pension as someone living in Spain or are you considering a move within the European Union, then understanding your options can be a big influence on such a decision.

Two popular choices that you are likely to hear about as you conduct your research are Qualified Recognised Overseas Pension Scheme (QROPS) and Self-Invested Personal Pension (SIPP).

This article aims to provide you with a detailed comparison of QROPS vs SIPPs, highlighting their benefits, limitations, and the key factors to consider in making the best choice for your retirement planning.

An important aspect to view to describe before we present these differences is understanding the rules involved with the Lifetime Allowance.

Lifetime Allowance And Its Application.

When searching for or receiving advice about pension transfers you will come across an important term the Lifetime Allowance or LTA for short.

In very simple terms, this was the total amount you can build up in all your pension savings without incurring a tax charge. In April 2024 the limits imposed by the lifetime allowance were removed and replaced by a new allowance structure.

When considering your QROPS vs SIPPs, you now have to deal with three new lump sum allowances. These are:

  • Lump Sum Allowance (LSA) : This enables you to take a maximum of £268,275 as your 25% lump sum (PCLS) before tax in the UK.
  • Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100 which is the total amount the fund can release on death before a tax charge is levied on the excess.
  • Overseas Transfer Allowance (OTA) is also £1,073,100 if you transfer benefits to a QROPS where a 25% tax charge would be levied on the excess. If you want more information visit this link:

For more information about the Lifetime Allowance read on here.

However, as you may have encountered, in recent years, the LTA has gone through many changes and modifications. Even at the time this article is published, the information provided might have changed.

What is a QROPS?

A Qualified Recognised Overseas Pension Scheme (QROPS) is an overseas pension scheme that meets specific criteria set by Her Majesty’s Revenue and Customs (HMRC).

It allows UK pension holders to transfer their pension benefits to a scheme located outside the UK.

This option is particularly relevant for British expats and those who have a british pension who plan to retire abroad, as it can offer several financial advantages, including potential tax efficiencies in their new country of residence.

Benefits of QROPS

Tax Efficiency: One of the most significant benefits of QROPS is the potential for favourable tax treatment. For example, many countries, including Spain, offer tax advantages on pension withdrawals.

No Lifetime Allowance: UK pensions used to be subject to the Lifetime Allowance. This is no longer the case, but the LTA may well be re-introduced by this new administration bringing severe tax consequences of up to 55% on amounts in excess of £1,073,000.  QROPS do not have a lifetime allowance limit, which is the maximum amount you can accumulate in your pension pot without facing tax penalties. This can be particularly advantageous for high-net-worth individuals.

Flexible Currency Options: QROPS allow you to hold your pension in multiple currencies, reducing the risk of currency fluctuations impacting your retirement income.

Inheritance Benefits: Pensions held in a QROPS can be passed on to beneficiaries without being subject to UK income tax, after being 5 years in operation.

Investment Flexibility: QROPS often offer a broad range of investment options, allowing you to tailor your portfolio to your specific needs and risk appetite.

Eligibility for QROPS

To be eligible for a QROPS, you must:

  • Be between the ages of 18 to 75.
  • Be non-UK resident or intend to be within the next 12 months.
  • Be a non-UK citizen planning to leave the UK within one year.
  • QROPS are normally only viable for citizens of the EU.

If you would like to know more about QROPS, we’ve published an extensive article explaining how they work.

What is a SIPP?

A Self-Invested Personal Pension (SIPP) is a type of UK-based personal pension plan that offers control over your investments compared to other traditional pension schemes.

SIPPs have a reputation for flexibility and being a more cost-conscious scheme, allowing you to choose from a range of investment options, including stocks, bonds, mutual funds, and commercial property.

Benefits of SIPPs

  1. Investment Control: SIPPs provide the freedom to select and manage your investments, giving you the opportunity to tailor your pension portfolio according to your financial goals and risk tolerance.
  2. Tax Relief: Contributions to a SIPP qualify for tax relief, which can significantly boost the value of your pension pot over time.
  3. Flexible Access: At the age of 55, you can start withdrawing from your SIPP, with 25% of the pension pot available as a tax-free lump sum if you are a UK resident at the time. The remaining 75% is subject to income tax. This is due to rise to 57 from April 2008.
  4. Cost-Effectiveness: SIPPs can be more cost-effective compared to QROPS, as they typically involve lower fees and fewer administrative complexities.

Limitations of SIPPs

  1. UK Taxation: While SIPPs offer investment flexibility, they are still subject to taxation in your country of residence, which can impact your net pension income if you are residing abroad.
  2. Regulatory Restrictions: SIPPs must comply with HMRC regulations, which can limit the types of investments you can hold within the pension.
  3. Recent Changes In Spanish Tax Law: If you are currently in Spain or planning to reside there, UK pension holders with SIPPs face full Spanish wealth tax on their pension assets, as SIPPs are not exempt under Spanish tax law, limiting the tax benefits typically available for EU-based pension plans. [link to decision]

QROPS vs SIPPs: Key Differences

Tax Treatment

QROPS: Offers potential tax efficiencies in the country of residence, with benefits such as lower taxes on pension withdrawals.

SIPPs: Subject to UK tax regulations, which can impact the tax treatment of your pension assets. They would also be subject to future UK tax rulings which could have possible adverse consequences on the value of pension fund.

Lifetime Allowance

QROPS: No lifetime allowance, (except on transfer) making it suitable for high-net-worth individuals.

SIPPs: Up to the 5th of April 2024, there was a lifetime allowance threshold of £1,073,100 million. Exceeding this threshold could have resulted in potential tax liabilities, yet this has now been abolished. However with the recent election result in July 2024, this could be re-instated.

Investment Options

QROPS: Broad range of investment options, often including international assets.

SIPPs: Wide range of investments, but limited by HMRC regulations.

Currency Flexibility

QROPS: Allows holding pension funds in multiple currencies, mitigating the risk of fluctuations.

SIPPs: Primarily UK-based, with limited currency flexibility.

Inheritance Benefits

QROPS: Pension funds can be passed on without UK income tax being levied on death once the QROPS has been in force for 5 years.

SIPPs: Subject to UK income tax rules on death, which can impact the amount passed on to beneficiaries.

QROPS vs SIPPs: Making the Right Choice

If you considering a pension scheme, based on personal research or professional advice, choosing between a QROPS and a SIPP depends on several factors, including your residency status, retirement plans, tax considerations, and investment preferences.

At Private Client Consultancy we’ve drawn up a list of scenarios to help guide your decision:

When to Consider a QROPS

In most cases we would recommend those who have a UK pension and residing in Spain and the EU to consider a QROPS in the following 4 situations:

  • You plan to retire in Spain or another EU country and want to benefit from local tax efficiencies.
  • You have a significant pension pot and want to avoid the UK lifetime allowance limit now replaced by three other allowances (better called restrictions) which fundamentally have the same affect as the LTA.
  • You prefer holding your pension in EUROS to mitigate the risk in currency changes.
  • You wish to pass on your pension benefits to non-UK residents without being penalised by UK taxes.
  • Those trying to lose their status as UK domicile and Mitigate UK inheritance tax.

When to Consider a SIPP

As with QROPS in the following cases, it is best to consider a SIPP as your choice of pension plan when you are faced with these 4 scenarios:

  • You are comfortable managing your investments and want greater control over your pension portfolio.
  • You prefer the cost-effectiveness and simplicity of a UK-based pension scheme.
  • You plan to return to the UK in the future and want to keep your pension within the UK tax regime.
  • You do not have concerns about the lifetime allowance limit.


Both QROPS and SIPPs offer distinct advantages for expats living in Spain or the EU who have UK based pensions.

Understanding the differences between these pension schemes and how they align with your financial goals is essential for making an informed decision for your future.

Consulting with a specialist financial adviser who understands both UK and local tax laws can provide invaluable assistance, ensuring that your retirement planning is optimised for your specific circumstances.

At Private Client Consultancy we’re experts in pension transfers and finding the right pension scheme for you.
We are all about providing you with personalised advice and happy to explore your pension options further.

Get in touch with our expert wealth advisers today and let us assist you in reaching your financial goals with peace of mind.

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