mwall

hello all you wonderfully helpful people!
Here is yet another request for advice!
Have $5k in a 401k with employer here. I know that we can cash it out incurring a 10% hit and then 27% tax. I also know that there is a way to transfer the 401k to an IRA. My question is is there any way to transfer it to a UK equivalant?
Thank you,
Mary

6 days left!

Bob

Can't help here, but I'd be interested to find out as well

callé

yeah, me too! I have asked somewhat and have been told you can roll over into UK account so that's what i'll be doing with mine. But I havent really worked out the details yet so will love to find out more.
Six days!!! how wonderful!!

Triumphrob

Good luck with the move. We too, have $ in Roth IRA and would like to find out what to do with it. Will watch with interest
Rob

dunroving

I've tried both ways (US to UK, and UK to US). Both times was told that, due to different tax laws in US/UK, any pension fund that has tax-free implications can not be transferred (either way).

I believe the only way would be to do what someone mentioned - cash in and take a tax hit, then re-invest in the UK/US.

I did get a useful PM from someone last time, though. If I can find it I'll post the details.

dunroving

OK, no wonder I couldn't find it - it wasn't a PM, but an email. Unfortunately, it didn't address the question of whether you can transfer a 401k to a UK pension fund. However, there was some useful information.

Here it is, with names removed:

"I have lived in the UK, then Sweden and the US and been exposed to three quite different tax systems. Even though the US system is the most complicated, I can see good logic behind nearly all of it, and I test the code to the fringes, while I see a lot of illogic in European systems, particularly in Sweden, where your income tax rate literally depends on the color of the toilet seat in your bathroom. Brown, Black or White is a lower tax rate while pastel shades get you a higher tax rate.

If you have a tax deferred US 401k (which you can rollover into an IRA if you leave the US company) or IRA, my advice to you is to keep the US IRA and not try to take it to the UK, because the types of investments you can have in a US IRA will perform way, way better than anything you are allowed to have in the UK - basically any funds, stocks and some options. The more freedom you have to choose your own investments and trading, the more you will start to get a clue how people like Warren Buffet and Donald Trump got rich, ( it's all about leverage) and the better you will do.

There is basically no equivalent to an IRA in the UK. My son has something called an ISA, but the financial industry has seen to it that legislation mandated lots of restrictions on the type of accounts and investments, by which they cream out such a high managment fee percentage that it destroys the total return. They are not even worth bothering with unless you expect to realise trading gains greater than the $15000 of capital gains a year that are tax free in England, and my son is nowhere near that level yet, so he would be better off with a straightforward brokerage account. So few people in England have a clue about the stock market. It is definitely the way to go in the US, and people are very into it in Sweden.

Keeping a US IRA and trading US securities in that account via the Internet is far better than anything you can get in Europe. You don't have to report anything for taxes in England until you withdraw funds in retirement, because US IRAs are treaty-protected.
I would almost advise any Brit to come to the US at least sometime in his life and become tax resident for just long enough to get a US IRA that he then has a right to keep for tax-free trading after he goes back.

Pensions are a total rip off in Europe, because the basic plot is to make you dependent on the state so that you will continue to have to vote for them. I really feel free here, and this democracy works. That's why I would never go back before the unlikely event that the UK decides to adopt a US-style Constitution and Bill of Rights. I would just like to get the amount I have tied up in my old UK plan into my IRA here, where I can make at least 15% a year return on the money."

Elvira

IMHO, the e-mail quoted by dunroving respresents a load of right-wing twaddle!

The only thing I would agree with that it would not make sense to try to transfer a sizeable US pension plan to a British one because the tax-free benefits are non-transferrable. However, since the OP's pot is very small ($5000 IMSMR), it's probably not worth keeping it either as any pension derived from it is likely to be minuscule.

ISAs have nothing to do with pensions (though they can of course be used as part of retirement planning). Charges depend on the underlying fund chosen. Just like in the US, there are some that have high charges and some that are very low (eg index-linked funds). You do not pay any tax on the profits and they do not have to be declared on income tax returns; if there is a US equivalent, I have yet to find it! (Only open to UK residents, unfortunately...)

The UK equivalent of IRAs are personal pensions. Most pension plan providers have a wide range of funds to choose from, but there is also the option to self-invest via a SIPP (self-invested pension plan). Investment in UK pension plans get full tax relief at the highest rate of income tax (i.e. up to 40%).

There is also the option of stakeholder pensions: anyone (even children!) can invest up to GBP 3600 per year, even if they have no earned income, provided they meet the residency requirements.

Finally, given the choice between the US and UK tax systems, I would choose the latter any day since the former could send even a temperate mormon to

JAJ

If you are a US citizen then you need to consider:

- you are still liable to US federal tax even if living in the UK; and
- whether you might one day wish to return to the US

These reasons might mean it's better not to make the transfer. Of course you must still consider the UK tax issues inherent in keeping a US IRA.

If you are a US green card holder then:

- you'll likely lose your green card if you're in the UK for anything other than the short term;
- while you keep your green card you must file for US taxes
- keeping US investments might be one of the factors you use to argue for retaining your GC (but realistically if you see your future in the US it makes more sense to forget about any move until you have US citizenship)

Jeremy

dunroving

Must say as I won't be retiring until about 2023, I'm a bit worried about (a) how the dollar will fare against the dollar between now and then, and (b) whether any changes in legislation will affect me drawing a US pension from the UK (as I'll no doubt be in the UK before too long).

I'd like the option to transfer my US pension to the UK at some convenient point during the next 20 years (i.e., when the dollar is equal to 1 GBP).

No doubt by 2023, the dollar will be worth about 20 p, though.

nun

I'm in a similar situation with retirement funds in 401ks and 403Bs. I'm a UK/US dual
national and looked into the possibility of moving my us retirement funds to the
UK equivalent (ISA) when I return to the UK. Bottomline is you cannot do this as the
US/UK schemes are in no way linked. You have a couple of options.

1) Cash the funds take the 10% hit and pay the tax
2) Leave them where they are, of course this leaves you open to currency fluctuations
but if they get toob bad you can always excercise option 1

Once you hit 59.5 you can do the usual US retirement things, cash the funds, transfer
to an IRA or just take regular withdrawls. I'm not sure about the tax situation, but
there is a reciprocal tax agreement between the UK/US that I believe will prevent
double taxation.

Remember that there is a UK/US social security/NI reciprocal agreement so any
US SS contributions you've made can be applied to UK NI payments if you haven't
been making those while you've been abroad. If you have so much the better as
you may qualify for both UK and US government retirement benefits.