Should I take private pension out of UK?
#16
Re: Should I take private pension out of UK?
If you are US resident, it is likely that the IRS will not tax a defined pension benefit scheme as it defers to retirement.
However if, for example, you move it to Malta, then the IRS may look through the trust and tax the funds.
My advice is to get a US tax specialist in the relevant US state of residence to give an opinion ( which might be costly ), before moving a UK pension to a QROPS. It is a minefield.
However if, for example, you move it to Malta, then the IRS may look through the trust and tax the funds.
My advice is to get a US tax specialist in the relevant US state of residence to give an opinion ( which might be costly ), before moving a UK pension to a QROPS. It is a minefield.
However, the status of a cross border pension transfer is highly problematic and could be seen as a taxable distribution by the IRS.
#17
Forum Regular
Joined: Dec 2011
Posts: 193
Re: Should I take private pension out of UK?
How foreign pensions are taxed by the IRS will depend on the relevant tax treaty. Both the UK and Malta have comprehensive tax treaties with the US and pension plans receive US tax deferment on gains and contributions.
However, the status of a cross border pension transfer is highly problematic and could be seen as a taxable distribution by the IRS.
However, the status of a cross border pension transfer is highly problematic and could be seen as a taxable distribution by the IRS.
#18
Banned
Joined: Oct 2014
Posts: 3
Re: Should I take private pension out of UK?
There are UK based companies that have offices all over the world in order to make it more convenient for UK Expats. When a financial consultancy approach you to assist in moving your UK pension to a QROPS, it means that they need to acquire the right information 1st i.e the type of pension scheme and the balance. they can only get this information with a letter of authority that is signed by the policy holder. It is only when they receive the valuation that they would be able to advice on what your options are.
If your pension can be transferred and the client is happy with the advice given, only then can it be moved to a more tax favorable location i.e Guernsey. But this needs to be in the list of HMRC approved jurisdictions. Just because the client is situated in the US, doesn't mean that the funds will be transferred to the US. The client will need to find out from her adviser if there will be a tax issue when she eventually starts taking a draw down from her funds.
Please just make sure you work with a legit company that doesn't charge too much and discloses everything!!
If your pension can be transferred and the client is happy with the advice given, only then can it be moved to a more tax favorable location i.e Guernsey. But this needs to be in the list of HMRC approved jurisdictions. Just because the client is situated in the US, doesn't mean that the funds will be transferred to the US. The client will need to find out from her adviser if there will be a tax issue when she eventually starts taking a draw down from her funds.
Please just make sure you work with a legit company that doesn't charge too much and discloses everything!!
#19
Re: Should I take private pension out of UK?
There are UK based companies that have offices all over the world in order to make it more convenient for UK Expats. When a financial consultancy approach you to assist in moving your UK pension to a QROPS, it means that they need to acquire the right information 1st i.e the type of pension scheme and the balance. they can only get this information with a letter of authority that is signed by the policy holder. It is only when they receive the valuation that they would be able to advice on what your options are.
If your pension can be transferred and the client is happy with the advice given, only then can it be moved to a more tax favorable location i.e Guernsey. But this needs to be in the list of HMRC approved jurisdictions. Just because the client is situated in the US, doesn't mean that the funds will be transferred to the US. The client will need to find out from her adviser if there will be a tax issue when she eventually starts taking a draw down from her funds.
Please just make sure you work with a legit company that doesn't charge too much and discloses everything!!
If your pension can be transferred and the client is happy with the advice given, only then can it be moved to a more tax favorable location i.e Guernsey. But this needs to be in the list of HMRC approved jurisdictions. Just because the client is situated in the US, doesn't mean that the funds will be transferred to the US. The client will need to find out from her adviser if there will be a tax issue when she eventually starts taking a draw down from her funds.
Please just make sure you work with a legit company that doesn't charge too much and discloses everything!!
Understanding the tax situation of the pension is critical and so that requires an understanding of domestic and cross border taxation; this is often sadly lacking. The US has many tax treaties and the ones with the UK and Malta both have comprehensive pension sections that offer tax deferral on recognized pensions until income is taken. However, they don't offer that deferral on cross border pension transfers and so it would be a taxable event to a US tax payer. I have seen QROPS companies argue otherwise, but they don't have topay the tax.
#20
Forum Regular
Joined: Dec 2011
Posts: 193
Re: Should I take private pension out of UK?
The funds won't be transferred to the US because the IRS won't allow it.
Understanding the tax situation of the pension is critical and so that requires an understanding of domestic and cross border taxation; this is often sadly lacking. The US has many tax treaties and the ones with the UK and Malta both have comprehensive pension sections that offer tax deferral on recognized pensions until income is taken. However, they don't offer that deferral on cross border pension transfers and so it would be a taxable event to a US tax payer. I have seen QROPS companies argue otherwise, but they don't have topay the tax.
Understanding the tax situation of the pension is critical and so that requires an understanding of domestic and cross border taxation; this is often sadly lacking. The US has many tax treaties and the ones with the UK and Malta both have comprehensive pension sections that offer tax deferral on recognized pensions until income is taken. However, they don't offer that deferral on cross border pension transfers and so it would be a taxable event to a US tax payer. I have seen QROPS companies argue otherwise, but they don't have topay the tax.
I am aware of firms that target US residents for QROPS transfers and at least one QROPS firm that seems happy to take them.
I have spoken to another QROPS firm that won't take them until they have evidence that the US resident has taken professional tax advice, specific to the case. Pity all the QROPS providers don't go to such lengths.
I suspect the previous poster is new to the industry ( Tax favourable, ie Guernsey???? )
#21
Re: Should I take private pension out of UK?
I think you are on the mark with that comment.
I am aware of firms that target US residents for QROPS transfers and at least one QROPS firm that seems happy to take them.
I have spoken to another QROPS firm that won't take them until they have evidence that the US resident has taken professional tax advice, specific to the case. Pity all the QROPS providers don't go to such lengths.
I suspect the previous poster is new to the industry ( Tax favourable, ie Guernsey???? )
I am aware of firms that target US residents for QROPS transfers and at least one QROPS firm that seems happy to take them.
I have spoken to another QROPS firm that won't take them until they have evidence that the US resident has taken professional tax advice, specific to the case. Pity all the QROPS providers don't go to such lengths.
I suspect the previous poster is new to the industry ( Tax favourable, ie Guernsey???? )
#22
Just Joined
Joined: Jan 2015
Posts: 16
Re: Should I take private pension out of UK?
From my own dealings as an IFA, I know of at least two Maltese QROPS that are specifically 'US compliant' - in other words, they report to the IRS at scheme level (not at member level).
I dare say that holding such an arrangement might be considered more proper than holding a UK SIPP, where there is no reporting to the IRS.
I dare say that holding such an arrangement might be considered more proper than holding a UK SIPP, where there is no reporting to the IRS.
#23
Re: Should I take private pension out of UK?
From my own dealings as an IFA, I know of at least two Maltese QROPS that are specifically 'US compliant' - in other words, they report to the IRS at scheme level (not at member level).
I dare say that holding such an arrangement might be considered more proper than holding a UK SIPP, where there is no reporting to the IRS.
I dare say that holding such an arrangement might be considered more proper than holding a UK SIPP, where there is no reporting to the IRS.
A QROPS might be useful if the transfer is done before US tax becomes an issue, but the fees and funds offered in QROPS are terrible, IMHO.
A UK SIPP is believed by many to come under the definition of pension plan in the US/UK tax treaty and therefore has the same tax protections claimed by the Maltese QROPS people. The one are where Malta might win is the taxation of lump sums.....although with the UK's pension reform there's a good argument that the 25% UK tax free sum is also US tax free, particularly if you take it out over a number of years.
#25
Expat Warrior
Joined: Mar 2012
Posts: 5
Re: Should I take private pension out of UK?
Any more on this? marr, nun, others?
Have any US resident ex pats any recent experience of a UK pension transfer to a QROPS and the IRS tax treatment? Anyone seen an IRS ruling on the issue?
Have any US resident ex pats any recent experience of a UK pension transfer to a QROPS and the IRS tax treatment? Anyone seen an IRS ruling on the issue?
#26
Forum Regular
Joined: Dec 2011
Posts: 193
Re: Should I take private pension out of UK?
I know a UK Chartered Financial Planner that hold a US SEC licence. I will ask him and give you an opinion on this. I have my own opinion, but I am not a licenced IFA and would be cautious about giving it.
#27
Re: Should I take private pension out of UK?
I've heard QROPS companies trying to argue that the money is held in trust, but I dont think that will protect the US tax payer
#28
Forum Regular
Joined: Dec 2011
Posts: 193
Re: Should I take private pension out of UK?
There is not IRS ruling on this, but there are a couple of IRS letters about cross border pension transfers. Those letters, my reading of the DTA and knowledge of the US tax code make me believe that a QROPS transfer is a taxable event to a US tax resident or citizen.
I've heard QROPS companies trying to argue that the money is held in trust, but I dont think that will protect the US tax payer
I've heard QROPS companies trying to argue that the money is held in trust, but I dont think that will protect the US tax payer
#29
Re: Should I take private pension out of UK?
Exactly. You are responsible for your taxes. Most QROPS firms (maybe all) will tell you to get your own tax advice. They'll promote features of the US Malta DTA while minimizing the same aspects in the US UK DTA to persuade you to deposit your pension with them. Admitting to the US taxability of any cross-border pension transfer is not in their interest.
#30
Forum Regular
Joined: Dec 2011
Posts: 193
Re: Should I take private pension out of UK?
Still looking at this issue but this is worth posting. An IFA sent me this email that a new client has just received from his QROPS provider in Malta. He is a not in the US, but it gives you an indication of how IRS seem keen to look at US residents and QROPS!
"Foreign Account Tax Compliance Act (‘FATCA’) Obligations
We write to inform you that under regulations relating to FATCA, we are required to obtain information about you as member of the xxxxxxxx Scheme. FATCA is a United States federal law that requires United States persons, including individuals who live outside the United States, to report their financial accounts held outside of the United States, and requires foreign financial institutions to report to the Internal Revenue Service (IRS) about their U.S. clients/members and the ownership of the assets held. Enforcement of foreign tax compliance may include mandatory withholding, required when a U.S. payor cannot confirm the U.S. status of a foreign payee.
We understand that you are not a US individual and therefore it would be greatly appreciated if you would kindly confirm by completing the attached W8-BEN form in line with the applicable legislation and return a copy to us first via scan and then in original by courier at least by the end of February 2015.
Please note that you should immediately inform xxxxxxxxxx should your status change. Once you are classified as a U.S. Person as defined by the US Inland Revenue Services, xxxxxxxxx will report to the Inland Revenue Department information required for FATCA reporting, notwithstanding any confidentiality and non-disclosure clauses applicable in the relationship with xxxxxxxxx and any other professional secrecy or similar obligations of xxxxxx.
In the event that you fail to provide satisfactory information by the end of February 2015,xxxxxxxxx may take such action as it may deem appropriate in line with legislation and regulations on this matter."
"Foreign Account Tax Compliance Act (‘FATCA’) Obligations
We write to inform you that under regulations relating to FATCA, we are required to obtain information about you as member of the xxxxxxxx Scheme. FATCA is a United States federal law that requires United States persons, including individuals who live outside the United States, to report their financial accounts held outside of the United States, and requires foreign financial institutions to report to the Internal Revenue Service (IRS) about their U.S. clients/members and the ownership of the assets held. Enforcement of foreign tax compliance may include mandatory withholding, required when a U.S. payor cannot confirm the U.S. status of a foreign payee.
We understand that you are not a US individual and therefore it would be greatly appreciated if you would kindly confirm by completing the attached W8-BEN form in line with the applicable legislation and return a copy to us first via scan and then in original by courier at least by the end of February 2015.
Please note that you should immediately inform xxxxxxxxxx should your status change. Once you are classified as a U.S. Person as defined by the US Inland Revenue Services, xxxxxxxxx will report to the Inland Revenue Department information required for FATCA reporting, notwithstanding any confidentiality and non-disclosure clauses applicable in the relationship with xxxxxxxxx and any other professional secrecy or similar obligations of xxxxxx.
In the event that you fail to provide satisfactory information by the end of February 2015,xxxxxxxxx may take such action as it may deem appropriate in line with legislation and regulations on this matter."