bigglesworth

My apologies JS. I was indeed speaking generally. I should also have been a bit fuller in my comment.

Your usage of "trivial" was interesting as there are/were a set of rules for people with pots which are.were called "trivial". Under a gross value of approximately 18K they can simply be cashed in as you did with yours. (Assuming that one has no other pension, and is not in receipt of a pension), But the tax is always withheld until the end of the tax year (or later - HMRC have a history of not refunding the initial payment.
I think they are all being swept away though.

Bud the Wiser

I have two small pension pots maturing this year. I'm thinking off taking 25% out tax free and I'm not sure what to do with the rest.

MY question is can I put the tax free withdrawl in an ISA whilst living in the US?

I don't plan to bring the money over here, I'll keep it in the UK for when I return.

cyrian

No - the ISA is only for UK residents.
You can take the tax-free 25% and just leave the 75% where it is.
You don't have to draw a pension from the remainder.
You will benefit from tax-free growth within the pension wrapper.
Also the 25% tax-free lump sum may not actually be "tax-free" in the USA.
I am assuming that you are in Florida.
For example, this would be taxed in France.

Bud the Wiser

Many thanks. So I'm surmising it's probably best to leave things where they are until I return.

cyrian

That depends.
When you say maturing, do you mean that you become eligible to take the benefits or is it something that is reaching the end of an investment period?
If it is the first option, then you need to look at the growth it has been achieving and what the terms are - will you still be eligible for that sort of growth?
Ask on the USA forum about treatment by the IRS of "tax-free" benefits paid in the UK. In France the taxman treats these payments as untaxed income.
If the product is reaching the end of a stated period or if the returns are not great, then you can transfer into another product i.e. a SIPP where you can choose your investment strategy. Cash or stock market or Bonds or Gilts.
This would be something that would require professional advice and there would be a cost for the advice. Depending on the investment amount and the cost of advice this may not be an option.
Leaving things as they are until you return depends on how future governments treat "tax-free" lump sums when the new rules for cash withdrawals compete next year. You would only have to deal with one tax system if you did that.

Bud the Wiser

Found this.....

Cross-Border Pension Treatment Liberalized By US-UK Tax Treaty

A new tax treaty between the United States and the United Kingdom that became effective in UK on April 6, 2003 and in US on January 1, 2004, gives an appreciable tax relief for employees who are citizens of UK or US and employed in either country. This epoch of faster migration permits employers often to transfer employees between the US and UK for major business openings with strategic implications.

The treaty ensures that there will be no unfavorable tax consequences on the employees’ pension and retirement benefits. The treaty has specific importance because, apart from other matters, it permits US citizens resident in the UK to deduct, for US tax purposes, the subscriptions made to particular UK pension plans. Similarly, the authorities in both the countries agree that the contributions made by employees and employers on behalf of UK or US expatriate employees will appear as if those contributions originated in the country that sustains these pension plans.

theOAP

Are you required to file a resident US Federal tax return (1040)? If so, the general agreement is any UK sourced lump sum (even if the funds are left in the UK) is taxable by the US.

As regards the Treaty information you quote above, are you a UK employee who has been transferred to the US by that employer, and are still employed by that employer?

As was mentioned earlier, it might be wise to ask about your situation on the USA forum. Pensions are a highly disputed topic, even if setting inactive in the UK.

dunroving

For those of you following the pension developments, I thought you might be interested in what I am seeing in the annuities market. Although I likely won't buy a UK annuity, I do glance at the Sunday Times "Best Buy" tables every week for annuity rates, ISAs, etc.

For the longest time now, a single-life annuity, non index-linked, has sat at around 6.0% (so if you had a pot of £100,000, you'd get a lifetime pension of £6,000 p.a., but this wouldn't rise with inflation). This has now dropped to below 5.8%.

A similar annuity, but index-linked (rises with inflation) was sitting at 3.5% for the longest time, but lately these have dropped to about 3.35%.

So, reasons to buy an annuity are gradually getting slimmer and slimmer.

cyrian

Have a look at this article by Don Ezra where he discusses annuities and life expectancy.

Interview with Don Ezra - Benefits and Pensions Monitor

In the UK, I think of the retired population in 4 sectors.
a) Those with no personal pension savings.
b) Those with modest personal pension savings (under £30k)
c) Those with moderate personal pension savings (£30k to £100k)
d) Those with large personal savings (over £100k)
What is best for each group is different.
a) Does not apply
b) May be better to take the cash or, if eligible, go for an enhanced annuity.
c) They may have the most difficult decision - to take an annuity (having read the above article) or use drawdown (capped or flexible) or a mixture of the two.
d) Probably best to use drawdown where any remaining fund after death can be used to provide a spouse pension. Thereafter, any remaining fund is included in the last deceased's estate.
Important
If you buy an annuity or transfer money into another regime then you should expect to pay a fee to your advisor.
Anything above 1% for an initial fee or 1% for annual management is too high and you should shop around for a better deal.
You can pay
1) initial fees
2) transfer fees
3) annual fees

Some companies publish their fees online - search for low-cost SIPP providers.

dunroving

- plus of course, knowing when we will snuff it would make retirement planning and decisions so much easier.

MissGB

I'm very confused about the whole business of pension funds, etc etc. Does anyone know what is the best thing to do with your Australian superannuation when you move back to the UK? I understand that it will just sit and accrue interest and then I will be able to access it at 59, but if I wait another year it will be tax free (in Australia). What will be the tax implications of moving it as a lump sum be when it matures? I will be 51 when I move back, and no definitely not staying in Oz for another 9 years!! Superannuation has performed really well here in the last 5 years, so now it is quite a sizeable nest egg.

cyrian

Sorry I have no idea what happens with this between Australia and UK but if you are resident in the UK then you have to declare your worldwide income to HMRC.
If someone gets a tax-free lump sum in the UK then it is taxable if the person lives in France or the USA (further up this thread).
If you subsequently transfer a cash sum (as distinct from tax-free) from Oz to UK then this would be your money and because it is not income then it would not be taxed.
However, you need to keep an eye on the exchange rates.
You could always leave the nest egg in Oz and take an income there.
I hope someone can advise on the UK - Oz tax treaty and explain the implications for you.

J.JsOH

Moving away from the lump sum issue - but still news for pensioners.
My UK military pension just went down a bit at turning state pension age at 65.
Military pensions for those with less then full pensionable service start at 60 and cannot be deferred start.

Now that reached 65 my monthly receipt has gone down due to a 2008 Pensions Act 'SPA Age National Insurance Modification Rule.' apparently because I was 'contracted out' of my military pension while still serving.

A similar thing can happen with UK State Pension. Pre retirement estimates of UK state pension show basic pension plus any Graduated Retirement Pension. What it fails to show is any reduction due to being contracted out and this is not reported to you until you commence UK state pension. So in my wifes case, the deduction of 'contracted out' equaled the benefit of GRP and so she ended up receiving from the UK state just the basic pension. Her private pension that caused the 'contracted' out' deduction is about the same as the amount the state deducted - so all in all, nothing gained by being 'contracted out'

Just saying and sharing the way it is.

bigglesworth

J.J.
I am not trying to nitpick, but just in case you have two things confused.
Graduated retirement benefit or pension is a REALLY old pension. It stopped 30 or 40 years ago, I think at the same time as State Earnings Related Pensions Schme (SERPS), which is what I think you are probably referring to, started.
So just check with DWP that they are referring to you having contracted oit of SERPS. Your GRP (which given your age you may have) should be unaffected and you should receive it anyway I believe. Although it wont buy you much more than a cup of tea.

The problem with a lot of these contracted out schemes was that you should put the contracted out amount into an alternative pension. That alternative was provided by various "pension" companies - in truth usually just insurance companies- and the policies were sold by insurance salesmen (They are called "Financial Advisors" nowadays but most are just salesmen).
Their projections were often rather optimistic.

cyrian

J.J.
In addition to the basic State Pension, I have 3 different types of additional State Pension. Graduated contributions; SERPS and another one.
Some of these components do not amount to much but because I was not contracted out they add up to a significant sum.
The State Pension is not taxed but it does add into your annual income for tax purposes. They modify your tax code which is then is applied to your private pension to adjust for the State Pension. If they have altered your tax code which is applied to your private pension then your net income from this will fall compared to before you received the State Pension.
You can check your tax code on your monthly payslips before and after to see if it has changed.