hutchison

I am considering investing another £10k into my uk private pension (which is probably about 10k) before i leave on friday, considering a 3 year visa. it may or may not turn out permanent who knows.

would it be more US tax efficient to invest it into a UK private pension which will be frozen, or into a US 401k on entry?

Pulaski

If you also have the money to max-out a 401k then I would put the money in a UK PP, and do both.

If you have 20+ years of work left ahead of you I would invest it in the UK - it will provide an additional layer of diversification, and if you stay in the US long term you can still build up a sizable 401k pot.

If you move the money to the US you will be adding a foreign exchange transaction at a miserably low rate.

With a 401k the money would be accessible in an emergency, albeit with taxes and a penalty - the money in a UK PP is locked up until retirement.

In my opinion most of the arguments appear to be in favour of investing in the UK PP.

Cook_County

But if the employee contributions are greater than the employer contributions some part of the plan would be a foreign grantor trust, requiring the nuisance of annual 3520-A and 3520 filing...

Asg123

If you put the money in a UK PP you may lose half of it, or at least it may be a hassle to avoid losing half of it (through reduction in your US SS) through WEP (Windfall Elimination Provision), depending on your circumstances. Study WEP (there's a lot of information on it on this site) to see if it may apply to you. If you haven't got time, just put the money in your 401k and not your UK PP.

hutchison

I added the maximum into it i could considering my current 2017 uk earnings which were a modest £2850. That means I could and did Add £2880 into my private pension., and the govt further add £720 bringing the total contribution to £3600.
if you have not earned much of a 'wage' you are allowed to claim tax relief for a private pension contribution up to £3600 / year regardless if you earned £100 or £3600 that is if the earnings are lower than the contribution.
Since I have been paid in Dividends this year I was restricted as you cannot claim tax relief on div's for your private pension.

If you had earned more than £3600 then you can have tax relief up to your earned wage on your contribution.
my private pension will now have no further contributions, I am under the impression I am allowed to make further contributions but tax relief will not available, and it will probably be taxed when it is drawn (if it is in the staes) therefore I may aswell invest in something there which may not be taxed as much over there, or will it?

taken from pensionadvisoryservice.org.uk:
Option 3 - Paying into a UK pension scheme from abroad

Living abroad, or working for an employer who is based overseas, no longer limits the amount either of you can pay into a UK pension scheme. The downside is that tax relief may be limited - or not available at all.

Cook_County

So; it sounds (as you mention dividends) like you have a CFC; has it made check the box election to avoid being taxed on subpart F income?


You have also created a foreign grantor trust, requiring the nuisance of annual 3520-A and 3520 filing...

hutchison

It was my Ltd company in the uk, no longer trading but open in the uk until the end of the tax year here.
Foreign grantor trust, are you referring to the private pension ?