Pension pot in overseas scheme - tax treatment

Bostonerimus1

EdSwippet said:

Bostonerimus1 said:

The OP might not be dealing with Vanguard. I think Vanguard would find it difficult to justify the lump sum argument for payments made on a regular schedule and when filing the 1040NR I’d claim it back. It’s an important distinction as HMRC needs to be on that same page.

Vanguard don't need to justify it. They've simply mandated this policy by fiat, and that's that.

Claiming the withholding back on a 1040NR is not without its own problems. Paper filing only, and a wait of perhaps 18 months to two years before you see the refund from the IRS. Meanwhile, the IRS has interest-free use of your money. And in the case of a Roth, the overwithholding refund cannot be put back into the Roth account, which leads to a significant loss of tax sheltered headroom.

(For UK readers not familiar with the terminology here, a Roth IRA is approximately equivalent to an ISA. That is, it is composed of post-tax contributions. This is what makes applying withholding tax to every Roth IRA withdrawal so pernicious; it is no different to facing tax withholding on ISA withdrawals.)

All reasons for US expats to maintain a US postal address. 

These are all issues that the OP will have to navigate at some point, but not right now. What they should do is talk to their DC pension administrator to find out their policy on tax withholding on foreign payments. If I move back to the UK, before I leave the US I might well change my ROTH and IRA platform with that policy in mind.

EdSwippet

Bostonerimus1 said:

All reasons to maintain a US postal address.

Not really. Nonresident aliens cannot maintain or use US addresses with financial providers; see W-8BEN for why.

More accurately then, all reasons to completely avoid Vanguard US, if you are (or will be, in future) a US nonresident alien.

Bostonerimus1

EdSwippet said:

Bostonerimus1 said:

All reasons to maintain a US postal address.

Not really. Nonresident aliens cannot maintain or use US addresses with financial providers; see W-8BEN for why.

More accurately then, all reasons to completely avoid Vanguard US, if you are (or will be, in future) a US nonresident alien.

Vanguard is problematic, but other providers will also have their own or similar policies so check before you leave the US and if you are already a non-resident alien make sure you do know the policy of your providers. When anyone leaves the US they should put significant thought into arranging their financial accounts and have options. I have accounts with three US brokerages and three US banks to give me some flexibility.

Bostonerimus1

EdSwippet said:

Bostonerimus1 said:

All reasons to maintain a US postal address.

Not really. Nonresident aliens cannot maintain or use US addresses with financial providers; see W-8BEN for why.

Sorry the US postal address only helps if you are a US citizen. Then Vanguard does not apply the withholding even if the address on your account is outside the US.