UK Pension Transfer To USA | What Are The Rules?
LEARNING OBJECTIVES
We provide relevant, high quality and up-to-date financial information to individuals in the USA.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
The rules for transferring a UK pension
Options available to US residents
How to execute a UK to US transfer
Best practise when taking regulated advice
This guide is intended for US Residents with UK pensions.
Transferring a UK personal or company pension to the USA is not possible, however, there are solutions available to give you full control of your retirement in the States.
Whether you're an American expat returning home or a UK pension holder considering a move across the pond, understanding the implications, tax aspects, and available options is vital.
In this guide, we'll provide insights into various options, challenges, and potential strategies available when considering transferring a UK pension to the USA.
Can I Transfer my UK Pension to the USA?
Simply put, you cannot move a UK pension to the US. The Pensions Regulator has strict criteria to allow a UK pension transfer. This includes moving a UK pension to the USA or transferring to another UK pension scheme.
The receiving scheme needs to adhere to certain principles in relation to how it operates. This will include factors such as age of access, draw-down options, and taxation. In general, the terms will need to be similar to that of a UK pension scheme.
Transfer UK Pension to 401K
Following on from the above, a 401Ks or IRAs do not meet the required principles and structure of a UK pension.
For example, you can access your IRA at any age in the event of an emergency. For your UK pension, you cannot access before age 55 (58 from 2027).
As such, you cannot make a UK pension rollover or transfer your UK pension to a US retirement plan.
This is applicable to both the US IRA and 401K account.
UK to US Pension Transfer | Understanding Your Options
As you can't transfer your SIPP directly to the USA, there are three options available:
01 QROPS (Qualifying Recognised Overseas Pension Scheme)
As it sounds, a QROPS is an overseas scheme that qualifies for UK pension transfers. A full list of the available schemes can be found here.
As of March 2017, a QROPS has become obsolete for US residents.
The UK Government introduced the Overseas Transfers Charge. This means, if you reside outside the EEA, you will incur a 25% tax charge on your total pension value. Whilst a number of these 'USA QROPS' still exist, their use will create a significant tax liability for those living in the USA and no benefit.
02 International SIPP (Self Invested Personal Pension)
The best solution for the majority of clients. An International SIPP or iSIPP is a UK pension created for non-UK residents. It allows you to do the following:
Manage your investments
Mitigate currency risk
Select with or without a financial adviser your fund allocation
Gain access to your pension pot as and when you like
Take advantage of the Double Tax Treaty between the US and UK
Mitigate income tax whilst only paying your taxes in the US on pension income
For British expats potentially returning home, it offers the benefit of being UK compliant
03 Withdraw 100% of the Pension Fund
The final option is to encash the full pension. You should only consider this after taking tax advice and if the value is reasonably small.
For large amounts it will create a significant tax liability with money being held back at source i.e by the UK pension provider. This will need to be claimed back and you will likely also have US tax to pay.
Working With An Expat Financial Advisor
The Wealth Genesis specialises in UK Pension transfers and asset allocation for US residents.
We hold Series 65 qualifications as standard, as well as being regulated by the SEC. This allows us to implement bespoke solutions to meet your goals.
Whether you require the full service including product selection, asset allocation and ongoing advice for drawing on your pension or if you wish to self select, we cater to all clients requirements.
FAQs
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At The Wealth Genesis, we charge an industry low flat-fee of £3,000 setup and 0.85% ongoing for the fully managed service.
Self managed accounts have a reduced ongoing fee.
Product costs vary but start from zero setup, £216 annual SIPP costs and 0.34% investment platform fees.
We will recommend a product based on your needs and objectives. -
Yes, you can access your pension pot in any way you please, whether it be monthly, annually or on an ad-hoc basis.
The key considerations are; Fund allocation and tax i.e do we want to generate income, preserve your capital or something else.For tax, we can assist in ensuring the pension provider pays all income to your account gross of UK taxation.
You will then need to declare the income in the US.
Please note, any withdrawals will affect the longer term retirement provisions you hold and can result in income shortfalls later in life. -
No, as it will be a UK to UK pension transfer.
It is classed as a non taxable event. -
Depending on the product provider utilised, you can invest in an extensive array of funds.
This includes ETFs, mutual funds with multi-currency options.
For niche areas, contact us now and we can confirm prior to moving forward.
