UK/US dual citizen fatca pension nightmare

badmemory

Has your bank not yet sent you a letter asking you to prove that you are not American? There are several threads on here about it. I had one & I've never been there (don't want to go there either) never even had dollar travellers cheques, they used to be very acceptable 50 years ago. But my bank just had to do the prove it thing even if it did look fraudulent.

xylophone

If you have the right to a UK or EU passport/citizenship that'll do nicely.

The OP has dual UK/US citizenship.

I've lived in the UK for over 30 years and have no US ties or US accounts/property/assets. My whole life is in the UK.

Under the above circumstances, it would seem that renouncing US citizenship would be no hardship.

bowlhead99

SWsmith wrote: »

HL do not accept 'US persons' for their SIPPS.

xylophone wrote: »

Bigger brokers, including Hargreaves Lansdown and Barclays Stockbrokers, said their doors remain open to US citizens.

http://www.hl.co.uk/funds/terms


What is a U.S. Person?
Regulation S of the U.S. Securities Act 1933 defines a U.S. Person as:

Any natural person residing in the U.S. (regardless of whether they have US citizenship). [etc etc etc]

Is the OP a "US person" in terms of the above?

It might be worth giving HL a ring about a transfer to their SIPP?

No, the OP is not a US person in those terms. Those terms are about specific US securities laws which impose rules on investment transactions for individuals living in the US. Much as a whole swathe of UK/European financial services regulation is applicable to individuals living in UK/ Europe causing financial services business to be careful to whom they market and allow into their funds etc.

But as you have quoted, they are relevant to a "natural person" (an individual, as distinct from a legal person such as a company etc) who is "residing in the US". They are not relevant to a natural person who is *not* residing in the US, and as such, are a red herring if you are trying to find out whether a UK firm will accept business from UK residents who are citizens of the US.

The HL services T&Cs do not have a blanket ban on US citizens.They do mention that you that you have to tell them if you change residence or citizenship status (residence can affect what products can be made available and both residence and citizenship will affect their tax reporting / FATCA / CRS stuff).

EdSwippet wrote: »

The US person definition you quote is the one that prevents sale of non-US mutual funds to US citizens. Unfortunately it is subtly different to the definition of a US person for US tax purposes. It's a needlessly technical distinction, but in this case very much on point, unfortunately.

Sorry, but you have it confused. As per your first link, the securities act definition does not prevent sale of non-US mutual funds to US *citizens*; wikipedia notes that the "Regulation S definition of U.S. person does not include U.S. citizens not resident in the U.S.". It is about US *residents*. The US industry regulators restrict what their residents can buy.

The second link is about who can be taxed. The US famously taxes both its residents and its citizens even if they live abroard; the latter in exchange for the benefit of being able to travel on a US passport and get the assistance of consular support where necessary and being able to return to live in the US whenever they want, use US courts, etc.

The differences between the two definitions are not 'needlessly technical' ; the key distinction for practical purposes for individuals, is that one is about who lives in the US and one is about who has a responsibility to US taxes, which are two different groups of people.

So, when a US citizen who is living outside the US is doing their research into whether a financial services firm will accept their business, and reads something something US something, they should check whether it is talking about US residents or US taxpayers. Financial services firms usually go to great lengths to define all their terms, given the importance of regulation in the sector.

DairyQueen wrote: »

Have I understood this correctly?
Platforms are refusing to do business with (i.e. discriminating against) a specific group of UK residents/citizens in order to circumvent legislation imposed by a foreign government?

Platforms have regulatory / compliance risks and workloads depending on the types of customers they choose to take on. In the case of the US FATCA regulations, they have to report info on the accounts of US residents and citizens to HMRC because the UK government agreed to exchange such information with the US. They can avoid needing to do that if they are a local UK-based financial institution who closes (or doesn't open) accounts for US taxpayers. So, some industry participants will choose not to take on customers who are US citizens. It's a business decision.

After FATCA was launched, and hundreds of countries including the UK signed up to it, the UK launched its own automatic exchange of information programs with its crown dependencies and overseas territories (e.g. Isle of Man, Guernsey, Gibraltar, Cayman) and later was an early adopter of the OECD's similar 'common reporting standard' where information about people having accounts in one country while resident of another is shared annually automatically, and there are 100+ countries signed up to participate.

So, financial institutions are now sending reports to HMRC containing information about customers with foreign tax residences as a matter of course, so the US is not really the outlier it initially was - and if companies are filing reports on a bunch of customers it doesn't take a huge leap to also include the US customers in the report at the same time.

However, as countries other than the US have simple residence-based taxation, these latter programs are all about reporting people with foreign residency rather than citizenship. There may not be many of those customer types if new pension accounts are only offered to people who are bona fide UK residents because very few people are resident in multiple countries. So US customers are still 'unusually' burdensome because you can have a UK resident customer wanting an ISA, but he might still be reportable to the US due to citizenship. Whereas someone reportable to France due to French residency is probably not going to be opening a UK ISA because to do that he would also need to be UK resident, and he's probably not both.


Basically, the US FATCA rules have not turned out to impact the financial services market options for US citizens in the UK and elsewhere quite as badly as people first feared, given financial institutions are now routinely sharing information via local tax authorities with tens of other countries and need to have complex and expensive systems and processes in place - so there is less of a compliance saving in turning down UK resident US citizens.



Still, there are some businesses that decided early it was just easier not to take on US citizens as customers for certain account types, and having made a rule about not wanting US citizens they haven't bothered to go back and retract it and rebuild their systems and processes.

I note that FATCA was enacted in 2010. Which of our wonderful UK governments agreed to force UK organisations to act as Uncle Sam's unpaid snoops? Brown or Cameron?

It was a 2010 US bill but the agreement for the UK to cooperate with it was struck in 2012, and the government of the time was not exactly alone in doing so (112 other countries have followed suit using similar template agreements).

Anyone know if this is an industry-wide practice? If so, it would seem that the law of unintended consequences applies and the OP may indeed have to renounce US citizenship in return for equal treatment.

His options are to stop being a US citizen (which may not be practical if he wants to guarantee hassle-free travel to see his mum back in the US) or to use financial institutions that don't mind US citizens as long as they're UK resident. Hundreds of thousands of US-born people in the UK are doing OK, but it does require an extra bit of window shopping to find out whether they take US citizens.

The OP asks "Are there any UK pension providers I can transfer to who will accept 'US persons' - or don't ask?" but really it is about who will accept 'US citizens' resident in the UK, and fortunately there are many who will do that.

badmemory wrote: »

Has your bank not yet sent you a letter asking you to prove that you are not American? There are several threads on here about it. I had one & I've never been there (don't want to go there either) never even had dollar travellers cheques, they used to be very acceptable 50 years ago. But my bank just had to do the prove it thing even if it did look fraudulent.

I expect they didn't ask you to 'prove' you were not American, if you have never even been there and presumably didn't have a US address, passport, phone number or standing orders to US accounts on their files. It would be very difficult for you to prove a negative if that was what they challenged you to do.

But perhaps they asked you to confirm (rather than 'prove') that you weren't US resident or citizen so that they could tick you off the list as having confirmed your residency and non-US citizenship which they would accept and record for their files as long as it didn't conflict with other information they had. It's now standard to do a self-certification form for tax status when opening a new account.

EdSwippet

bowlhead99 wrote: »

Sorry, but you have it confused. As per your first link, the securities act definition does not prevent sale of non-US mutual funds to US *citizens*; wikipedia notes that the "Regulation S definition of U.S. person does not include U.S. citizens not resident in the U.S.". It is about US *residents*. The US industry regulators restrict what their residents can buy.

Thanks. Typo rather than confusion, but accuracy is pretty relevant here. I'll fix the original.

EdSwippet

bowlhead99 wrote: »

It was a 2010 US bill but the agreement for the UK to cooperate with it was struck in 2012, and the government of the time was not exactly alone in doing so (112 other countries have followed suit using similar template agreements).

To be clear, these are one-sided 'agreements' made under threat of a blanket 30% US withholding on every payment from the US to a foreign bank if not 'agreed to'. To me, that looks more like gunboat diplomacy than negotiation. (No country would have acceded to a similar demand from Eritrea, this being the only other country that routinely demands tax from its citizens no matter where they reside!)

Anyway, for what it's worth the EU is now concerned about the effects of FATCA on Americans (and in particular Accidental Americans) living in the EU -- which for the moment still includes the UK -- to the point where there is a Motion for a resolution up for vote. Among other things, the motion...

8. Regrets the inherent lack of reciprocity of IGAs signed by Member States, especially in terms of the scope of information to be exchanged, which is broader for Member States than it is for the US; calls on all Member States to collectively suspend the application of their IGAs (or the sharing of all information other than that in respect of accounts held in the EU by US citizens resident in the US) until such time as the US agrees to a multilateral approach to the automatic exchange of information (AEOI), by either repealing FATCA and joining the CRS or renegotiating FATCA on an EU-wide basis and with identical reciprocal sharing obligations on both sides of the Atlantic;

SWsmith

Thank you to everyone for their replies and for sharing this information.
FATCA and the US system of citizenship based taxation are complex issues...outdated and burdensome.
I don't know how to do a quote on this forum (apologies) but

bowlhead99 said

@The OP asks "Are there any UK pension providers I can transfer to who will accept 'US persons' - or don't ask?" but really it is about who will accept 'US citizens' resident in the UK, and fortunately there are many who will do that."

I have searched extensively and I'm struggling to come up with any kind of shortlist. Does anyone know who they are? Any suggestions for FFIs /platforms that accept "US citizens resident in the UK" ? In the next 2-4 years I will need to transfer my personal pension plan to gain access to the funds. I know terms and conditions could change in the future but I need to plan. I think HL could be one of them - or did I get that info wrong?

Once again, many thanks for the helpful comments

bowlhead99

SWsmith wrote: »

I have searched extensively and I'm struggling to come up with any kind of shortlist. Does anyone know who they are? Any suggestions for FFIs /platforms that accept "US citizens resident in the UK"

Do you mean you are struggling to find a webpage called 'shortlist of platforms that accept US citizens resident in the UK' ? I must admit, I don't know of such a site as I've never needed to look for one, not being one.

Or just that you are struggling to find a list of plaforms that you might like to use, to make your own shortlist before you send them each an email to ask if they have any issue with opening a pension account for a UK resident who happens to be a US citizen?

If the latter, there are a variety of platform comparison sites around, primarily comparing the firms on price rather than on 'features' such as what type of customers they accept. But would make a good start point for you to see what platform you'd like to use, and then just ask the platform the question do they have any restriction on UK-resident US citizens.

An example is http://monevator.com/compare-uk-cheapest-online-brokers/

Or another price comparison tool for platforms which has the names of the 'usual suspects' is forum user Snowman's spreadsheet: https://forums.moneysavingexpert.com/discussion/5583030/coolly-comparing-investment-platform-charges-snowmans-spreadsheet

You do have 2-4 years to find the answer so plenty of time on your side.

The above will be a decent starting point if you are particularly looking for a SIPP, which is the route many people in the DIY sector are going for their pensions. There are also 'traditional' personal pensions offered by insurance groups such as Aegon, Aviva, Scottish Widows etc. (you mentioned you already have Aegon). Typically they would be accessed via an advisor/intermediary rather than DIY although there are some intermediaries that can set you up with them on an execution-only basis.

In the next 2-4 years I will need to transfer my personal pension plan to gain access to the funds. I know terms and conditions could change in the future but I need to plan. I think HL could be one of them - or did I get that info wrong?

They don't say on their website or in Ts & Cs that they don't accept US citizens. If you want to be sure, ask them.

Really though it would be better to take a browse through the pension offerings from a whole load of different providers and decide which one(s) are of interest before asking them whether they have any issues taking you on as a customer. Rather than the other way around looking for all the ones that might take you on as a customer before deciding if their pricing and servicing options are acceptable.


Although this may be time consuming, if you've already worked out which firms you would prefer to work with (subject to them taking US citizens) by using the different comparison tools and researching them via reading forum posts etc, it stops you just jumping at the first one you see that will have you and landing with a sub-optimal deal. And as you mention, it is a couple of years yet before you need to have made the decision.


When checking with firms, unfortunately you might need to ask more than once whether they really take US citizens who are resident in the UK, and perhaps clarify for the avoidance of doubt that you're not US resident if a junior customer service person pings back an email saying they can't take 'US persons'.

SWsmith

Thanks. I have been reading up on this subject and researching sites/platforms for months on end. I've checked terms and conditions for most plans and the majority will not accept 'US taxpayers' or 'US persons'. I will double check with my accountant next year when I have to file my US tax return/ FBAR etc. It could be that SIPPS are the problem - possibly because they're considered PFICs. I don't know. I'm too young to consider an annuity at this stage of my life. Possibly a part annuity when I reach 70. It appears most drawdown plans are SIPPS. Is that correct? I'd be fine with a plan that allowed UFPLS... I'm not paying for an IFA (again) since most are not clued up on US law.

Thanks for all the info.

SWsmith

It's the decumlation stage that is the major problem. Distributions... I've lived in the UK for decades. I have a British passport. I'm a British taxpayer. I have no dealings or assets in/with US. It seems crazy that FATCA can control my destiny - and deny me my right to invest and retire. Giving up US citizenship/passport is easier said than done. I won't bore you with all the details but it is not a simple process - it's a complicated and expensive option. Please do not consider taking US citizenship without thinking it through very carefully.

dunstonh

It appears most drawdown plans are SIPPS. Is that correct?

No. Indeed, the UKs largest drawdown provider is a personal pension.

I'd be fine with a plan that allowed UFPLS

That is virtually all of them.

I'm not paying for an IFA (again) since most are not clued up on US law.

And many won't want to deal with you either because their PI insurance won't cover dealing with judgements in the US.