UK Personal Pension Advice
#16
Lost in BE Cyberspace
Joined: May 2010
Location: San Diego, California
Posts: 9,662
Re: UK Personal Pension Advice
From someone I know who has contemplated the problem carefully: (not me)
Claiming your UK State Old Age pension will trigger the WEP reduction in your US social security. You are obliged to inform US Social Security when you start your UK State Old Age pension and may be subject to penalties if you do not.
Note that holders of US 401k pension funds are not subject to WEP on their Social Security pensions because they hold a 401k account.
Similarly, under the US/UK tax treaty your UK personal pension is treated like a US 401k pension savings account, that is, it does not trigger WEP, is taxed as income as and when withdrawn and has no tax free allowance.
The 25% tax free allowance is a concession from the HMRC to UK tax payers and has no bearing on US tax liability.
Claiming your UK State Old Age pension will trigger the WEP reduction in your US social security. You are obliged to inform US Social Security when you start your UK State Old Age pension and may be subject to penalties if you do not.
Note that holders of US 401k pension funds are not subject to WEP on their Social Security pensions because they hold a 401k account.
Similarly, under the US/UK tax treaty your UK personal pension is treated like a US 401k pension savings account, that is, it does not trigger WEP, is taxed as income as and when withdrawn and has no tax free allowance.
The 25% tax free allowance is a concession from the HMRC to UK tax payers and has no bearing on US tax liability.
#17
Forum Regular
Joined: Apr 2012
Location: Cumbria to Northern Michigan
Posts: 30
Re: UK Personal Pension Advice
My UK “personal pension” is similar to a US IRA in that it was nothing to do with my employer (I set it up myself and there were never any employer contributions). I’m pretty sure this is not WEP’able in the same way a US IRA is not, contrary to what seems to be implied in some of the posts above (that anything that is referred to in the UK as a “pension” is also treated as subject to the WEP rules in the US). But let me know if I am misunderstanding this.
#18
Lost in BE Cyberspace
Joined: May 2010
Location: San Diego, California
Posts: 9,662
Re: UK Personal Pension Advice
My UK “personal pension” is similar to a US IRA in that it was nothing to do with my employer (I set it up myself and there were never any employer contributions). I’m pretty sure this is not WEP’able in the same way a US IRA is not, contrary to what seems to be implied in some of the posts above (that anything that is referred to in the UK as a “pension” is also treated as subject to the WEP rules in the US). But let me know if I am misunderstanding this.
#19
Re: UK Personal Pension Advice
I believe that is consistent with what I communicated earlier which is that the only way to escape WEP on a foreign pension is either to forfeit all rights to a pension before becoming eligible or to fail into the exception category which requires that the pension be funded by voluntary employee contributions, that are separate, and in addition to, the pension payment, and the only UK pensions that I know of that meet that criteria are old style Additional Voluntary Contribution plans known as AVCs or FSAVCs and the portion of the UK state pension that is attributable to voluntary NI contributions.
In todays world, the equivalent of the old style AVCs and FSAVCs are named personal pensions and sometimes referred to as defined contribution plans (not to be confused with employer sponsored plans that can share the same names) so perhaps I should have added that part.
In todays world, the equivalent of the old style AVCs and FSAVCs are named personal pensions and sometimes referred to as defined contribution plans (not to be confused with employer sponsored plans that can share the same names) so perhaps I should have added that part.