rpjs

Just got this via LinkedIn (makes a change from all the recruiter solicitations):

My initial thought is "scam", seeing as it's well known that the IRS doesn't allow QROPS and surely as I am no longer UK-resident I wouldn't be liable for UK tax anyway.

But what does the BE hivemind think?

scrubbedexpat099

As I understand it is theoretically possible but the costs are significant.

So impractical for most.

Pulaski

The IRS doesn't care whether HMRC thinks something is taxable or not.

rpjs

Except that if HMRC deems that something to be taxable, surely the tax treaty allows one to take a credit of the UK taxes paid against any US tax liability?

Pulaski

Usually, yes.

I meant that if the IRS is able to tax something they will irrespective of HMRC or any other county's taxing authorities, and as you point out foreign tax can often be applied as a credit against that.

rpjs

Presumably the tax treaty's protection against double taxation means there's an obligation on both parties to ensure that the primary taxation of any income is levied in the country where the taxpayer is resident. I.e. it's not fair for the IRS if HMRC taxes the pension of a US-resident UK pensioner at source in the UK. The taxpayer would be able to claim the UK tax as a credit against US tax, but then the IRS would lose revenue to the HMRC. Or is there some sort of reconciliation process between the two countries to ensure the revenue ends up in the right place?

ghj9

How funny that I have come across this post. I thought I recognised the wording in the original message and that is because I wrote it!
To clarify a couple of points. It is most certainly not a scam. I am an SEC regulated advisor. You are right in stating that a pension cannot be transferred to the USA. It does not state that anywhere in my message. A UK pension is a UK derived income and therefore taxable in the UK regardless of where you are resident. As people have stated there is a double taxation treaty in place however.
The purpose of the message was to introduce myself as one of only a handful of people based and regulated in the US that can assist with UK pension planning and offer to discuss the points in a bit more detail. That offer still stands.

sir_eccles

What an odd first post.

lansbury

My wife and I are both dual US/UK citizens, who live in the US. We have 5 UK derived pensions between us, paid into our UK bank. On none of those pensions do we pay UK income tax, tax is paid only to the IRS. We do not avail ourselves of the double taxation clause, and our income is considerably in excess of our personal allowances in the UK.

Making a first post claiming to be an expert with such a glaring error, seems to say at the very least rpjs had cause to be suspicious.

nun

UK pensions are well covered under the US/UK tax treaty. If you are a US resident the income from most UK pensions is free of UK tax....as is UK state pension. UK Government pensions are a bit more complicated.

Any unsolicited communication should be treated as a scam, it might be genuine, but the best policy is to delete and ignore. Never respond to unsolicited calls, letters or emails.

QROPS are problematic for US residents as the initial transfer to a non UK pension might be an IRS taxable event. If you do a QROPS transfer before you become liable to US tax then there do appear to be some US tax advantages in a Maltese QROPS. But the costs and fees of QROPS are usually high so all the advertised tax advantages might well be wiped out.

IMHO it's best to leave UK pensions in the UK and make sure you have the best pension deal there. Learn something about investing, asset allocation, rebalancing and diversification and keep costs down.

nun

I assume you are aware of US-Individual-2002 and the exemption from UK taxation that it gives for several UK income sources, including pension income, under the US/UK tax treaty.

I would be interested in your opinion of whether or not the transfer of money from a UK pension to a QROPS outside the UK (I assume you would recommend Malta) is a US taxable event?

nun

FYI here are some IRS letters that address cross-border pension transfers. They are not rulings, but do highlight the potential issues with a QROPS for a US resident. The first one explains why a UK pension cannot be "rolled over" to a US qualified pension.

http://www.irs.gov/pub/irs-utl/am2008009.pdf

The next one specifically addresses a UK to Malta pension transfer and concludes that it might well be a taxable event because it is a cross border transfer.

http://www.irs.gov/pub/irs-wd/11-0096.pdf

The final one talks about a SIPP transfer and also states that


http://www.irs.gov/pub/irs-wd/10-0151.pdf

From all this it seems to me that a QROPS transfer does not receive any treaty protection from the taxation of income or gains. If it is to be US tax free you'd have to rely on US tax rules to achieve that without any modification from the tax treaty. Of course, if you were to do a Maltese QROPS and you paid tax on the transfer you'd have a large US tax free basis and would get protection from tax on gains under the Malta/US treaty. Still, paying tax on the transfer is not good tax planning and I always worry about the cost of these transfers. If you are looking at a QROPS get independent tax and financial advice......don't trust the pension company or use any of the "experts" they recommend.

Owen778

I have received spam on LinkedIn from a company called ******, claiming to be specialists in expat pensions. They have called me on my work phone four times in the last year or so, the latest yesterday. They are annoying.

If a pension management company based in New York can afford to locate potential clients through searches on LinkedIn followed by multiple cold calls to Houston, then most likely they will be the ones who take the profit, not me.

EDIT: Well, that's a surprise. I'm guessing this company also sends spam here often enough that their company name is in the words filter!

And I suspect ghj9 works for them, too.

nun

Changes to the UK pension system have removed many of the previous restrictions so that QROPS have lost a number of their supposed advantages.

It's important not to ignore your UK pension pots, but rather than thinking about QROPS I'd look at the quality of your current plan and if you think you can do better
move it to another UK pension.....that transfer is definitely US tax free......but be very careful as there are a number of scams out there so only deal with bonafide
companies that you contact first.

Maybe the best pension advice for long term UK expats is to make Voluntary Class 2 NI payments.

nun

The treaty gives primary taxation authority to the country of residence, but there is the usual US saving clause that allows the US to tax it's citizens and residents as if the treaty had not come into force. There are a few exceptions to the saving clause and those are mostly in the area of pensions. There are also some minimum withholding percentages applied to things like dividends. Article 23 allows for resourcing of income and domestic law in the US and the UK allows for foreign tax credits so you don't get taxed twice.