Wanting to convert DB to drawdown to fund early retirement with other Pensions funding retirement

dunstonh

That's interesting, so keeping both my US and UK citizenship while living in the UK  as a resident can affects things ?

Yes.   Retaining US citizenship would block the majority of adviser firms.  As a US citizen, you retain the right to use US courts to sue and most PI insurance contracts do not cover legal action outside of the UK which leads to the refusal to transact with a US citizen.     Firms dealing with ex pats would include coverage for that sort of thing but firms with little or no need for it won't have it included.

Jacklob

I would suggest you talk to Jonathan Laws as Cameron James Finance, they specialise in expat pension transfers and they are very efficient.  They also deal with UK residents and I have just gone through a defined benefit pension transfer with them and I cannot fault them. They do deal with US citizens. 

Malthusian

Brie said:

Is there any option still of transferring it to a QROPS?  And then taking drawdown from that?  Maybe via Channel Islands or IoM?

The OP is returning to the UK. There is no obvious advantage to them transferring to a QROPS instead of a UK pension (and plenty of downsides). Non-UK residents are not exempt from the requirement to take financial advice to transfer out of a DB pension so you can't do it by staying outside the UK system. The DB pension will still be inside it.

Due to the USA's uniquely aggressive taxation of worldwide income, I doubt there are any advantages for a US citizen in a QROPS over a UK pension scheme either. From an IRS perspective it's an offshore trust fund wherever it is.

@OP: Is there any scope to use the 401k for the early years of retirement? (I know penalties apply for early withdrawals from US 401ks, but not how penal these are, compared to the likely cost / hassle of successfully cashing in the British Steel pension.)

USExpat

Malthusian said:

Brie said:

Is there any option still of transferring it to a QROPS?  And then taking drawdown from that?  Maybe via Channel Islands or IoM?

The OP is returning to the UK. There is no obvious advantage to them transferring to a QROPS instead of a UK pension (and plenty of downsides). Non-UK residents are not exempt from the requirement to take financial advice to transfer out of a DB pension so you can't do it by staying outside the UK system. The DB pension will still be inside it.

Due to the USA's uniquely aggressive taxation of worldwide income, I doubt there are any advantages for a US citizen in a QROPS over a UK pension scheme either. From an IRS perspective it's an offshore trust fund wherever it is.

@OP: Is there any scope to use the 401k for the early years of retirement? (I know penalties apply for early withdrawals from US 401ks, but not how penal these are, compared to the likely cost / hassle of successfully cashing in the British Steel pension.)

Yes, my back up plan is to use the 401k to fund the 7 years up to 62. It would take a chunk of it to fund the 7 years and had planned to mainly leave it alone and stay invested. The BS money will take 20+ years to break even with the ETV and receiving it as an annuity on top of the US money will put me into the 40% bracket. Sounds like using the 401k will be my easiest option though.

Albermarle

and receiving it as an annuity on top of the US money will put me into the 40% bracket.

Only a small % of UK retired people have enough income that they have to  pay 40% tax, so in that way you will still be way ahead of the game as such.

official_Grant

USExpat said:

I left the UK 25 years ago and will be returning next year to retire early. I have a DB from 14 years service prior to moving overseas. My 25 years overseas have allowed me to build up another substantial DB Pension and 401k. My plan was to transfer my old DB to a drawdown to fund my retirement from 55 to 62. At 62 my other DB will payout along with Social security. 401K fill act as a back up for discretionary spending such as long hauls trips, cars etc. My income at 62 will more than cover my expenses(house paid off).
What are my chances of finding someone and getting the ok to transfer the original DB plan to allow drawdown.
The big elephant in the room is that its a British Steel DB and most  wont touch me with a barge pole. Thanks

Depending on the value, it would be possible to find an adviser, even with British Steel. As others have mentioned, UK advisers won't be able to help US citizens / tax payers - so you would need to find a way to sever ties, which may not be possible. . 

Other dynamic is that an adviser, if doing their job correctly, must start off from the point of view that your DB pension is a secure income and if you can meet realistic retirement objectives without transferring to a Drawdown / invested solution, it could be hard to get the advice you need. 

I think the US issue could be a tricky hurdle to get over if you have pension funds there that will make up your retirement provisions. 

Retireinten

Have you considered drawing your DB from 55 and topping up with funds from your 401k?

It will protect a portion of your 401k and reduce your income in later Iife to limit 40% tax liability