nun

The best way to fund retirement in the US is to take advantage of any company plans that you can as the company will generally match the funds you put into something like a 401k up to about 5%, it varies with each company. There are also tax deferred plans for self employed people. Finally if you meet the income requirements you can fund a tax deferred IRA or an after tax ROTH.

im9907620

IRA or Roth IRA are a good way to top your pension funds if you have spare income. Equally, if you don't fancy the restrictions with pensions, then you could start to save in mutuals (the same as UK unit trusts (ISAs)) or just in a savings account though it looks as though interesr rates may well be lower in the near term. If, by any chance, anyone is renting property in the UK then these earnings can be used to contribute to a UK pension scheme as long it has been earned in the last 5 tax years.

agedgrandad

Just saw your post about QROPS from last October. Would be very interested indeed to learn more about this and how you got on.
I have heard about the possibility of transferring from a UK SIPP (which I have) into a Jersey based QROP; but didn't think it worked for transferring to the US. Any info would be very much appreciated. Thx.

moanne

Could you please let me have this friends name for my son in America. Thanks Mo

nun

Please read ALL the previous posts. Bottomline is that it is not possible to transfer a UK pension fund to a US qualified plan as the IRS does not recognize UK plans as "qualified". Anyone who tells you differently is wrong and if you try it you may end up in trouble with the IRS. Leave retirement funds in the country where they originated until you retire!

If you read the FAQs in the kestrel website they explicitly state that you cannot transfer UK based pensions to US plans like 401ks and IRAs.

orangej24

I'm new to the website and have just read through all of the thread on pensions. I saw a couple of apparently conflicting opinions on the "tax free" 25% lump sum obtainable from a UK Company pension fund after retirement age. Is it taxable in the USA or not? ori s it more complicated? I am now a US citizen with a pension coming due from work in the UK in the 60s and 70s when I was a Brit
David:

nun

This is a complicated area. As a US citizen you are going to be taxed on your worldwide income. There is a US/UK tax treaty that covers pensions and the taxation in each country, but you need to see a US and UK tax specialist to work this out as there are lots of "clauses within clauses" that are difficult to work through.

orangej24

Thanks, for the prompt reply.I guess I am not surprised at the answer?
If and when I sort it out I'll do another post for info
D

chicagojlo

I used to work at a private pension co in the UK, transferring people's policies to other providers for them as well as setting up their annuities/lump sums. Basically the rule about transferring it to another country is that it has to be to a pension scheme which can't be touched until retirement. I don't believe there are any schemes like that in the US which is why you can't transfer them here.

Regarding lump sums - you can get your 25% tax free lump sum paid to wherever you want as well as do what you want with it. Of course you have to have reached the age to qualify for the lump sum or have qualified to retire in some other capacity. You can also ask your pension provider to pay your annuity to your overseas bank account if you want. UK/US taxes aren't my specialty though I'm afraid.

Regarding death benefits - you can have as much as you want paid out to your spouse on death, but your annuity will be lower for the more you ask to have paid out (obviously because chances are they will be paying it out for longer). You should ask your pension provider to draw up quotes of your predicted annuity with varying levels of death benefit. I believe joint whole life was the most expensive.

Transferring a policy also incurs a lot of fees in normal circumstances. The further away from retirement you are the more the fees are. You also have less chance of having anything worth transferring as most pension providers have a minimum amount that they will accept.

Also the residence rule - isn't it 180 days a year that qualifies as resident? Aren't there also rules about how many days a year you have to be here to maintain LPR?

Bob

Depends on who/why resident status if for, it's different from a tax v immigration point of view...

nun

I just took a look ate the US/UK treaty and the savings clause in Article 1 allows either country to tax its residents or citizens according to its own laws despite the treaty in most cases. However, paragraphs 1b, 3 and 5 of Article 17 dealing with pensions are exceptions, so I believe that to the extent that the UK pension is tax free it will be tax free to the US citizen too. Also I believe that a ROTH IRA will be tax free in the UK as well as the US.

I'm not 100% certain about the above as it is complex, with multiple dependent clauses and "notwithstandings", but when you go to an adviser they should talk to you about the Articles and paragraphs I mention

dunroving

Got to watch out for those notwithstandings - end their evil cousins, the heretofores.

Why can't financial stuff be written in plain English?

orangej24

Just did a Google for the treaty and quickly got overwhelmed. Can you give us your link to the treaty and I.ll quit foruming till I get an answer from a tax attorney

dunroving

Here, take two headache pills before reading.

http://www.irs.gov/businesses/small/...105254,00.html

Darn it, that's the Totalization agreement (SS taxes), I must have lost the link in my favorites.

im9907620

David, the answers posted here are correct (subject to individual circumstances of course). A TFC lump sum will not be taxed in the US as it would not be taxed in the UK. Of course, the resulting income will be taxed in the US at your highest marginal rate.

Whether you actually buy an annuity of course is another matter. A number of clients have moved their funds to a UK SIPP to explore greater investment fund choice (and growth potentially) but also to 'drawdown' an income rather than buy an annuity which are poor value right now unless you live for a long time! You can drawdown under certain age related imcome parameters until 75. Generally, only wise for larger funds, e.g £75,000+ due to the investment risk and charges.

However, a SIPP can invest in dollar denominated funds or even just dollar cash. If you think that the dollar will strengthen (not just this week!) over the next year or so, then you could convert it back before deciding on annuity or drawdown and attain some currency gain as well as hopefully investment gain.

NB - not to be contrued as advice and intended for general information only