Is it worth transferring pension accounts? Pls help.

sleepygirlzzzz

Hello,

I have 2 separate pension accounts and am debating whether or not to transfer one into the other. Both pensions were opened with my previous employer - they changed pension providers a few years ago which is why I have 2 different providers.

I am planning to move the US next year (I'm a US citizen but have been living in the UK for the past 10 years) and thought it would make sense to combine the 2 pensions so that I would only have to keep track of one pension once I leave the UK. But now that I've been reading a few articles online, I'm having second thoughts. Each pension has a current value of less than £10k and I read that if that is the case, it's not worth tranferring.

Any thoughts/advice?

Many thanks in advance for any help!

xylophone

http://www.qropsguide.com/
might be relevant to your situation.

Aegis

xylophone wrote: »

http://www.qropsguide.com/
might be relevant to your situation.

It's worth noting that that site's front page is out of date since the Budget this year, where the reporting period was changed from 5 years to 10 years and modified somewhat. I've also yet to see a purpose-built QROPS that would be both reputable and cost effective for anyone with only £20,000 to transfer, so I suspect this might be a non-starter.

That said, there may be some employer sponsored schemes in the US which can qualify under QROPS legislation, so that could be worth considering. This method would still require cross border financial planning and tax advice, so again is likely to be inefficient in terms of cost.

jamesd

What little I've read on this says that while HMRC do recognise some US pensions for QROPS, the IRS does not recognise UK pensions for inbound transfers because UK pensions don't meet US rules, like lower contribution limits. The tax treaty between UK and US does allow US people to have UK pensions, just not add more money to them, and leaving the pension in the UK until you take an income from it seems to be the most commonly made suggestion to deal with it.

So while you will need to research this a bit, that at least gives you some summary of what I think was likely to be best based on what I read about it. It's definitely something that you should discuss with whoever is handling your tax planning for the year in which you return to the US.

Combining the two UK pensions might make sense, it depends on what sort of pension they are. Are they final salary or other defined benefit types? Or the alternative, defined contribution where you can pick your own investments from a selection? If the former it is unlikely to be worth transferring. If the latter, then it probably is worth doing.

jamesd

One other thing I recall now. There seems to be some uncertainty about whether schemes with less than 50% employer contributions or which have been transferred will qualify for the tax treaty, at least according to some readings of the treaty. You or your professional adviser will need to take a view on those issues.