Transferring UK pension to usa

Douglas92117

Right I have a UK pension and want to transfer it to the USA the UK government site states Transform Group Simplified Employee Pension Plan is an approved transfer at a rate of 25% taxed. I Can't find any such plan please help otherwise my pension is taxed 55% if I can find a company to take it. Which is the same as cashing out penalty but how do you do that I am 35 years old. If I can't be directed to Transform Group Simplified Employee Pension Plan. I would sooner cash out of my UK pension and place the cash in UK account so I can transfer to existing 401k that won't accept UK pension. I am an us citizen that worked in England for 10years. I feel dumbstruck by it all please help

EdSwippet

Douglas92117 wrote: »

Right I have a UK pension and want to transfer it to the USA ...

The bottom line is that you cannot transfer a UK pension to the US and have it remain intact. The UK permits QROPS pensions transfers out to a number of countries, including the US, but the US does not permit any foreign pensions to be transferred in to IRAs or 401ks. Anyone who tells you otherwise is almost certainly operating a scam.

It is possible for you to move your UK pension via QROPS to Malta, for example, but that a) doesn't really solve the problem you want to solve, and b) introduces a heap of US tax problems that you would almost certainly want to live without, for example, UK pensions are exempt from US tax until drawn under the US/UK tax treaty, but a pension held in Malta loses that treaty protection.

As for 'cashing out'... not possible. Aside from a few cases involving terminal illness and the like, the UK does not allow any pension early withdrawal before age 55, not even with a tax penalty. If you are 'conned' out of your pension then you would pay 55% penalty tax, and the provider is also fined, so even this is not a viable way to access UK pension funds early.

Your best bet, and arguably your only current sensible one, is to simply leave this pension in the UK for the next two decades or more, and then draw it down exactly as you would a 401k. Whether or not you as a US person can benefit from the 25% tax-free lump sum paid by UK pensions is a topic of permanent debate even (especially!) among tax professional, but overall your UK pension should behave just like a 401k or IRA for you. That is, not taxable annually but only on withdrawal, and then taxable as income and only to your 'state of residence', so assuming at that point you are living back in the US, you would pay US federal tax at normal graduated rates plus any state tax on top.

There are infinite ways in which transferring your UK pension elsewhere could backfire. And given that under the US/UK tax treaty it will function just like an IRA or 401k would, no real reason to move it anyway.

bostonerimus

Ed is correct, leave you pension in the UK. You cannot transfer a UK pension to a US recognized retirement plan and if you are a US tax resident the only way to maintain the tax deferral on your UK pension is to leave it where it is.

dunroving

From almost 20 years on a British expats site, this question has cropped up on a regular basis. Every time, the pattern of the thread goes something like this:

Stage 1: Question is asked.

Stage 2: Several people in the know state that essentially, it is impossible, or not worth the risk/cost. Also, as per comments above, you'll find people who say they can help you do it, but these are scams.

Stage 3: Input from people who spout about QROPS being the solution.

Stage 4: After exchanges back and forth, the people who interject at Stage 3 are incapable of supplying the evidence that this will work for anyone other than those with obscene amounts of money.

So, let's just skip all this and answer your question: No, it's not possible. However, as I think you are indicating, you could possibly cash out your UK pension, depending on your age and the rules of the pension, either as a single lump or via gradual withdrawals. You could then use that money to meet living costs, thereby subsidising your ability to invest maximal amount in 401k/IRA, etc., in the US.

[ETA: I just saw that you are 35 y.o., so maybe this is a plan for 20 years' time when you reach 55.]

I essentially did something similar to subsidise my UK SIPP contributions. I took periodic withdrawals from my 403(b), used these to subsidise my living costs and maximised my investment in occupational pension/MPAVCs and a SIPP.

I would give you one piece of life-advice, however. Be really, really sure your long-term future lies in the US before making this move (I mean moving your pension, not yourself!).

Douglas92117

Thank you I am from USA originally been told be home office I no longer have a legal basis for being in UK due to the changes that came into effect this year

Two followup questions if I move my pension into a sipp then can I transfer the sipp over to my 401k or similar in states and on the p85 I have to fill out for leaving UK there is a section about claiming back taxes can I use this to mitigate my losses

EdSwippet

Douglas92117 wrote: »

Thank you I am from USA originally been told be home office I no longer have a legal basis for being in UK due to the changes that came into effect this year

Sorry to hear that. I have been on the receiving end of something similar in the past, and it is not a whole lot of fun.

Douglas92117 wrote: »

Two followup questions if I move my pension into a sipp then can I transfer the sipp over to my 401k or similar in states and on the p85 I have to fill out for leaving UK there is a section about claiming back taxes can I use this to mitigate my losses

You could certainly move your old employer pension into a SIPP if you wanted when you leave that employer, but you cannot then move a SIPP into a US 401k or IRA any more than you can any employer or other type of UK pension (stakeholder pension, personal pension, and so on). There is no way to directly move any type of UK pension into a US one, and also no realistic way to take any early withdrawals from a UK pension.

No idea on the second part of you question, regarding P85 and claiming back any taxes. Sorry.

thedutydoctor

Doneroving - thanks for the insight, I also find myself in the same predicament, in my early years I worked for an oil and gas corp, long story the private pension I had with them and then left in the late 80s was transferred 4 times to a company that I finally tracked down in LEEDS called CAPITA. Since I cannot get my pension out to the USA, and that is what they are saying, can I just request CAPITA to pay me out a monthly transaction, similar to how we would use my 401k?

For some reason they say this is not possible without having a financial pension adviser confirm the paperwork... is this the norm now, really really confused on what to do with this pension since it is quite considerable.

Linton

thedutydoctor wrote: »

Doneroving - thanks for the insight, I also find myself in the same predicament, in my early years I worked for an oil and gas corp, long story the private pension I had with them and then left in the late 80s was transferred 4 times to a company that I finally tracked down in LEEDS called CAPITA. Since I cannot get my pension out to the USA, and that is what they are saying, can I just request CAPITA to pay me out a monthly transaction, similar to how we would use my 401k?

For some reason they say this is not possible without having a financial pension adviser confirm the paperwork... is this the norm now, really really confused on what to do with this pension since it is quite considerable.

If you are younger than 55 you cant take cash even if you do have an IFA. If you are more than 55.....

This is only the norm for companies that dont deal directly with the public, or it could be because your pension includes guarantees. If it is a straight DC pension with no guarantees you should be able to transfer out to another provider who will let you take the money however you want. I suggest you ask in a separate thread if you want more details as it is not US specific. The topic has come up many times before.

WarrenStean

There does appear to be a lot of confusion over what can be done with a UK pension, both Personal Pensions and Occupational Pensions if somebody lives in the USA. This answer will apply to both US citizens as well as British Expats residing in the USA.

A few years ago there were several listed QROPS in the USA and it was possible (though not always advisable) to transfer UK pensions to these US based QROPS. However, it became apparent that the local rules in the USA clashed with those required by HMRC to qualify as a QROPS and all of the schemes were withdrawn as there was now the possibility for a 55% unauthorised member payment charged to be levied on any transfer from a UK scheme to a US scheme. Additionally, it is also correct that local non QROPS IRA´s and 401K´s will not allow transfers into them (and this would trigger the aforementioned UMPC in the UK anyway).

Since March 9th 2017 the UK government introduced the Overseas Transfer Charge which levies a 25% charge on transfers from UK pensions into an overseas scheme where the member does not live in the country where the scheme resides, unless that member and scheme are in the EEA. This then means that the use of a Malta QROPS for a US resident is effectively closed too anyway.

That leaves the choices for a US resident limited but not necessarily bad. Any UK pensions would need to be transferred to another UK scheme, ideally an International SIPP (the same as a regular SIPP but one which allows non UK residents as members) and there are some which cater for US residents. Amongst other things this means that the underlying investments should be US compliant (which normally means cheaper too). These International SIPPS can be treated in a very similar manner to an IRA, benefits can be drawn in a flexible manner from the age of 55 and can often be paid gross so you only have to worry about local US taxes and not UK taxes. These schemes will tend to give currency freedom so you can invest in both USD and GBP and have benefits paid in both. Benefits can be paid to a local US bank account too, which many UK schemes struggle with. You will need to use a Financial Advisor to make any transfers as typically the providers will not deal with the public and if the existing pension has certain guarantees then a full pension transfer report, called an APTA, will need to be provided too before any transfer can take place. Consolidating multiple pensions into a US compliant UK based International SIPP can often be a wise move and give back control that many people feel they lose when they no longer reside in the UK as it is near impossible to find a UK advisory firm that can deal with US residents. As outlined above there are often many other tangible benefits too. Bottom line is, if you live in the US and have UK personal or Occupational (company) pensions then make sure you deal with a US based and regulated advisory firm that specialises in this field. They should also be able to give advice on the tax implications in both the UK and the US on income drawn, the lump sum and any other potentially taxable events. There aren´t that many advisors in the US who can do this but they do exist and more often that not you will find you can have an initial, exploratory conversation with an advisor for free and establish where any issues are, how to resolve them and the costs involved. I work for such a firm, based in New York (but we have clients all over the USA) called Atlantica Wealth but we aren´t the only form that specialises in this area. I hope this helps.

bostonerimus

If you leave the money in your UK employer pension plan you do not need to worry about the investment funds inside being US compliant, the pension wrapper and the treaty protects you from US tax until drawdown and then that is taxed as income in both the US and the UK.