UK SIPP For US Residents
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IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
How to transfer your UK pensions to the US
The benefits of using a SIPP built for US residents
How UK pensions are taxed in the US
Key considerations when considering a UK pension transfer
This guide is intended for US residents with UK pension schemes.
The USA and the UK have different retirement accounts which operate under different rules, taxation and legislation. This article will explore transferring your UK pension to the US, through an International SIPP for US residents.
Note, an International SIPP is still a UK SIPP for all intents and purposes, but is branded as International as it is tailored for British Expats looking for flexible retirement benefits.
The International SIPP For British Expats
As a US resident, you may have received correspondence from your UK pension providers detailing the options available for taking retirement benefits.
Increasingly, traditional UK pension providers (Aviva, Scottish Widows, Standard Life, Aegon etc.) will no longer allow flexible-access draw-down retirement plans for those who live in the USA. They will likely offer 2 options:
Take the entirety of your UK pension as a lump sum in the US.
Purchase an annuity using your pension pot.
The first option will likely trigger a large tax bill in the US, providing your UK pension is of reasonable value.
The second option is typically undesirable, given low annuity rates and the removal of death benefits (i.e. the capability of passing on your pension pot to a loved one in the case of death).
The solution for US residents in this scenario is to utilise a UK SIPP specifically built for US residents.
UK To US Pension Transfer
By transferring your UK pensions to a US International SIPP, you can benefit from the following:
Full flexible-access draw-down, which means taking as much money as you want, when you want.
Hold and invest in USD, thus mitigating currency risk and exposure to the British Pound.
Invest your retirement funds in line with your objectives, priorities and attitude to risk (i.e through the use of mutual funds, ETFs or direct stocks.
Work with a professional and SEC regulated Expat Financial Adviser, providing peace of mind throughout your retirement in the US.
In terms of the process, a UK to US pension transfer will typically take between 1-3 months to complete, due to the due-diligence processes involved.
How Is My UK Pension Taxed In The US?
Your UK pension is taxed at your marginal rate of income in the US. We encourage all clients to make sure they have an NT code in place with the UK government and HMRC to ensure that proceeds are paid out gross, with no UK taxation deducted at source.
This is something we can help our clients to ensure a smooth transition. For a more detailed guide on the NT code, see here.
Note, the Pension Commencement Lump Sum (PCLS) tax-free payment is tax-free in the UK, not the US.
Cost Of Transferring My UK Pension To The US
All financial advisers have different charging structures. Typically, most Expat companies charge between 1% and 5% of the total value of your pensions to transfer them. They will also charge 1% annually for the management.
The Wealth Genesis is the first Expat Financial Adviser to charge the same flat-fee to all our clients, regardless of client circumstances, background or wealth.
Our flat-fee ensures our client's know exaclty what we charge at all times, and means that we only ever act in our client's best interests with no conflicts of interests or commissions at any stage.
We also charge a competitive annual management fee of 0.85%, resulting in less burden on your portfolio over an extended period.
Transfer my UK Pension to IRA | Can It Be Done?
Unfortunately, it is not possible to directly transfer a UK Pension to an Individual Retirement Account (IRA) or a 401k for that matter.
This is because the UK and the US operate under different pension laws. Whilst a double-taxation agreement on income is in place between the 2 countries, the laws and regulations around pensions differ. As such, they cannot be treated like for like.
US Expat Financial Advice
The Wealth Genesis is fully regulated by the SEC to provide advice to US residents on their UK pensions. Our flat-fee and independent status ensure we're in the best position possible to demystify cross-border planning and secure your retirement in the US.
To schedule a consultation with our expert advice team, follow the button below.
FAQs
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In the last few years, UK providers have become reluctant to offer their full benefits to non-UK residents, due to the complexities of cross-border planning.
This has been exacerbated post Brexit. -
No, the PCLS payment is only tax-free in the UK. We encourage all clients to take expert tax advice on foreign income payments
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If your provider is prepared to offer full flexible access draw-down as a US resident, then there is no issue with leaving your pensions as they are.
If they do not, you should consider using an International SIPP. -
We start with scheduling a ‘Discovery’ meeting, where we get to know your priorities and what is driving your decision making.
Following this, we will prepare a bespoke transfer report, tailored to your needs.
Should you then wish to proceed, we will execute the transfer for you, which should take between 1-3 months to complete.
