TiaMaria57

Hi Everyone,
My husband and I returning to the UK to retire and we leave at the end of March. We’re almost done, having sold our house and are now just attending to the final details before we leave.

I would be most grateful if anyone can tell me how to make the change from receiving direct deposit Social Security retirement payments (currently paid into a US bank), into a U.K. bank? The SSA’s on-line ‘My Social Security’ site would not accept our UK bank account number. So we called the SSA in Maryland about this problem they said we have to go through the American Embassy in London but ONLY after we return to the UK. This didn’t make sense to us since I’m sure that some people who leave the US for good won’t keep a US bank account open. If so where will their payments go in the interim? We are keeping one open but can anyone tell me how they changed from using a US bank to a foreign bank to receive their retirement pension from the SSA before they left the US for good? Surely it can it be arranged and paid into a UK bank before one actually arrives in the UK?

Many thanks in advance to anyone who has already gone through this process and who can shed light on how to do it.
Regards, TM57

Giantaxe

If you're keeping a US bank account open, why not continue to make payment of SS into it? That way you have the flexibility of moving the money to British £'s when you want and when it's advantageous exchange-rate wise.

TiaMaria57

Thank you for your reply and yes...we’d considered doing that. But this would involve paying FX fees. Direct Deposit is real time rate with no fees attached. Also, makes it easier when filing ones taxes. Since we are keeping other investments in the US it just makes sense to us to have the pension paid direct into a sterling account.
I’d be grateful if anyone can share their experience with this issue.

Pulaski

Using an FX broker such as WorldFirst, Transferwise, or Circle, the fees and FX spread would be extremely low.

TiaMaria57

Thank you for your reply Pulaski. We currently use the Australian company OFX broker and their fees are minimum. However, we’d really like to have the option available to us to set up the transfer of the SSA payment before we leave the US and then we can decide whether to go ahead and do it. It’s just that we don’t know how to go about doing it.

Vadio

It's really simple. You call the Embassy once you are in the UK, provide the relevant details, and the deposit will go straight into you UK account. There are no transfer fees, and the Fx rate is the best rate available 'on the day'. Deposits are made on the 3rd of each month, or the Friday before if the 3rd falls on a weekend or a Monday holiday in the US.

You SS is taxable in the UK per the treaty. Another advantage of depositing to a UK account is that you know the exact income to declare on your UK self-assessment.

We kept our US bank open mainly for use when I visited my parents. I also have IRAs, and will be taking RMDs this year, so it's more convenient to have an account in the US for those deposits.

It's unfortunate that you can't set it up until you arrive in the US, but having said that, payments you receive BEFORE the move will still be US taxable, so it's logical (?) that the SSA (never mind the IRS) would prefer those $$ to stay in the US while you are still resident.

Links here may answer some questions: https://uk.usembassy.gov/u-s-citizen...eral-benefits/.

TiaMaria57

Vadio, Thank you for your time taken in explaining and for all your advice. It makes much more sense to us now! I now understand about the US preferring to keep ones tax dollars!

Reading the previous replies and your suggestions, we have cemented our decision to keep the money flowing into our US bank. But should anything happen to one of us in the future we have the option later to change the payment system via the Embassy in London as you have explained above and it will make the UK tax accounting simple. We need simplicity in our old age!

Thanks to everyone for replying and offering their advice. The contributors to this website offer valuable advice for which I’m very grateful.
Regards, TM57

Vadio

Under the US-UK tax treaty, your SS benefits will still be taxable in the UK (not the US) assuming you elect to pay tax on the arising basis. Paying via the remittance basis is a minefield. This applies even if you keep the money in a US account.

If you keep the money in the US, you will still report to HMRC on a Self-Assessment, and pay tax here (again, assuming you elect to be taxed on the arising basis). Ultimately you will need to keep strict records and do the math. Personally, I feel that makes the whole tax filing more complicated, but each of us is different, so go with what works for you.

TiaMaria57

Thank you for this invaluable piece of information. I can see it’s a complicated system to work through for the best outcome and therefore even more thought is now required. Many thanks, TM57

theOAP

You'll have to do what you feel is right for your circumstances, but I do agree with the posts from Vadio.

I have my US SS paid to my UK bank account (I'm resident in the UK). As Vadio says, it is only taxable in the UK, even if you are a US citizen. (For 1040, line 20a is the gross amount, but line 20b, taxable amount, is $0 due to the treaty.)

Once you are settled in the UK with a UK bank account, it is worth considering. I understand the flexibility the FX advocates are suggesting, but once you are back in the UK, simplification of both US and UK tax returns makes life much simpler. The rate on the day is the best available, and the FX markets eventually balance themselves out (I've seen 1£=$2.30, 1£=$1.04, and all stops in between....often). Is the possible monetary gain worth it, considering with the FX rate " your funds may go down as well as up" as they say. How long are you willing to put the funds on hold in a US account (while paying UK tax on it) waiting for an improvement if the FX turns against you? 6 months, 1 year, 3 years, 5 years?

My 2p worth.

TiaMaria57

The OAP.....Your 2p worth is sound advice. Thank you for your filing information too.
Regards, TM57