IRS & "Tax-Free" UK pension lump sums
#46
Re: IRS & "Tax-Free" UK pension lump sums
Thanks nun,
Because I will be working until I'm 66 (2017) I'd like to defer all my pensions until then. I'm trying to plan for the eventuality of returning to the UK so ROTH's seem to be where I should put this pension disbursement, as well as converting my IRA that I have here.
I will already be getting the maximum WEP reduction of my SS pension when I draw it due to my Civil Service Pension.
Because I will be working until I'm 66 (2017) I'd like to defer all my pensions until then. I'm trying to plan for the eventuality of returning to the UK so ROTH's seem to be where I should put this pension disbursement, as well as converting my IRA that I have here.
I will already be getting the maximum WEP reduction of my SS pension when I draw it due to my Civil Service Pension.
#47
Re: IRS & "Tax-Free" UK pension lump sums
Because I will be working until I'm 66 (2017) I'd like to defer all my pensions until then. I'm trying to plan for the eventuality of returning to the UK so ROTH's seem to be where I should put this pension disbursement, as well as converting my IRA that I have here.
If you're planning to return to the U.K. would your strategy be to abandon your green card when you leave? Or become a U.S. citizen before you leave.
I will already be getting the maximum WEP reduction of my SS pension when I draw it due to my Civil Service Pension.
#48
Re: IRS & "Tax-Free" UK pension lump sums
I'm trying to plan for the eventuality of returning to the UK so ROTH's seem to be where I should put this pension disbursement, as well as converting my IRA that I have here.
I will already be getting the maximum WEP reduction of my SS pension when I draw it due to my Civil Service Pension.
#49
Re: IRS & "Tax-Free" UK pension lump sums
nun
Worked in private sector from 1985 to 1997, with some self employment before/after 1997, worked in civil service since 1997 so do not have 30 years of SS payment, based on the chart I will incur the max WEP which is currently $380'ish.
At 66 I will end up with a little over $1k/mo SS before WEP and around $3500/m civil service pension, add to that a probably tiny UK OAP from 1967~1985 NHI contributions and about $1/m from my UK pension. So $6k/m before WEP & taxes probably means I won't be able to afford to retire
JAJ
I have a house and an IRA, the IRA is currently invested in property and I hope to see those funds returned to my IRA before I retire. I'm trying to plan my retirement with an exit strategy to the UK if I feel so inclined. I think I need to take stock of my net worth to see if it would be better to apply for citizenship prior to returning to the UK due to lower limits allowed by resident alien status. USC or Resident Alien I would probably relinquish because of the tax filing requirements of the IRS, it is too onerous and I don't need the headache.
I think that before any country signs a tax treaty with the IRS/USA they should insist they get on the same page as the rest of the world rather than the rest of the world having to get on the same page as the IRS. I truly hope the rest of the world penalizes or rejects US investors in international investments based on the regulations being imposed and that it ultimately affects the USA's economy to such an extent the whole FACTA/FBAR silliness is dismantled.
Worked in private sector from 1985 to 1997, with some self employment before/after 1997, worked in civil service since 1997 so do not have 30 years of SS payment, based on the chart I will incur the max WEP which is currently $380'ish.
At 66 I will end up with a little over $1k/mo SS before WEP and around $3500/m civil service pension, add to that a probably tiny UK OAP from 1967~1985 NHI contributions and about $1/m from my UK pension. So $6k/m before WEP & taxes probably means I won't be able to afford to retire
JAJ
I have a house and an IRA, the IRA is currently invested in property and I hope to see those funds returned to my IRA before I retire. I'm trying to plan my retirement with an exit strategy to the UK if I feel so inclined. I think I need to take stock of my net worth to see if it would be better to apply for citizenship prior to returning to the UK due to lower limits allowed by resident alien status. USC or Resident Alien I would probably relinquish because of the tax filing requirements of the IRS, it is too onerous and I don't need the headache.
I think that before any country signs a tax treaty with the IRS/USA they should insist they get on the same page as the rest of the world rather than the rest of the world having to get on the same page as the IRS. I truly hope the rest of the world penalizes or rejects US investors in international investments based on the regulations being imposed and that it ultimately affects the USA's economy to such an extent the whole FACTA/FBAR silliness is dismantled.
#50
Re: IRS & "Tax-Free" UK pension lump sums
nun
Worked in private sector from 1985 to 1997, with some self employment before/after 1997, worked in civil service since 1997 so do not have 30 years of SS payment, based on the chart I will incur the max WEP which is currently $380'ish.
At 66 I will end up with a little over $1k/mo SS before WEP and around $3500/m civil service pension, add to that a probably tiny UK OAP from 1967~1985 NHI contributions and about $1/m from my UK pension. So $6k/m before WEP & taxes probably means I won't be able to afford to retire
Worked in private sector from 1985 to 1997, with some self employment before/after 1997, worked in civil service since 1997 so do not have 30 years of SS payment, based on the chart I will incur the max WEP which is currently $380'ish.
At 66 I will end up with a little over $1k/mo SS before WEP and around $3500/m civil service pension, add to that a probably tiny UK OAP from 1967~1985 NHI contributions and about $1/m from my UK pension. So $6k/m before WEP & taxes probably means I won't be able to afford to retire
You should look in to paying Class 2 voluntary NICs if you want to increase your UK state pension
#51
Re: IRS & "Tax-Free" UK pension lump sums
nun,
I know I can defer my UK OAP and get an extra 1% for every 5 weeks but tell me more about Class 2 voluntary NIC's. Could I take my pension due to start in August and buy the NIC's? Is there an annual limit? Would it provide a better return than a ROTH? Could I use my tax free lump sum? If so would it still be taxable here?
edit:
PS: I'm waiting for my HMRC pension statement that I requested about a week ago.
I know I can defer my UK OAP and get an extra 1% for every 5 weeks but tell me more about Class 2 voluntary NIC's. Could I take my pension due to start in August and buy the NIC's? Is there an annual limit? Would it provide a better return than a ROTH? Could I use my tax free lump sum? If so would it still be taxable here?
edit:
PS: I'm waiting for my HMRC pension statement that I requested about a week ago.
Last edited by Disenchanted; Feb 17th 2013 at 9:44 pm.
#52
Re: IRS & "Tax-Free" UK pension lump sums
nun,
I know I can defer my UK OAP and get an extra 1% for every 5 weeks but tell me more about Class 2 voluntary NIC's. Could I take my pension due to start in August and buy the NIC's? Is there an annual limit? Would it provide a better return than a ROTH? Could I use my tax free lump sum? If so would it still be taxable here?
edit:
PS: I'm waiting for my HMRC pension statement that I requested about a week ago.
I know I can defer my UK OAP and get an extra 1% for every 5 weeks but tell me more about Class 2 voluntary NIC's. Could I take my pension due to start in August and buy the NIC's? Is there an annual limit? Would it provide a better return than a ROTH? Could I use my tax free lump sum? If so would it still be taxable here?
edit:
PS: I'm waiting for my HMRC pension statement that I requested about a week ago.
Whether they provide a better return than a ROTH is like asking "how long is a pice of string". Pay the NICs and do the ROTH! That's what I do.
Also no matter what you do with your lump sum it is US taxable.
http://www.hmrc.gov.uk/pdfs/nico/ni38.pdf
#53
Re: IRS & "Tax-Free" UK pension lump sums
JAJ
I have a house and an IRA, the IRA is currently invested in property and I hope to see those funds returned to my IRA before I retire. I'm trying to plan my retirement with an exit strategy to the UK if I feel so inclined. I think I need to take stock of my net worth to see if it would be better to apply for citizenship prior to returning to the UK due to lower limits allowed by resident alien status. USC or Resident Alien I would probably relinquish because of the tax filing requirements of the IRS, it is too onerous and I don't need the headache.
I have a house and an IRA, the IRA is currently invested in property and I hope to see those funds returned to my IRA before I retire. I'm trying to plan my retirement with an exit strategy to the UK if I feel so inclined. I think I need to take stock of my net worth to see if it would be better to apply for citizenship prior to returning to the UK due to lower limits allowed by resident alien status. USC or Resident Alien I would probably relinquish because of the tax filing requirements of the IRS, it is too onerous and I don't need the headache.
Also, if you intend to bring your wife to the U.K., note the difficulties now to get a spouse visa and the fact she would be stuck on temporary status for 5 years.
#54
Re: IRS & "Tax-Free" UK pension lump sums
What does this mean? Do you have "alternative investments" in the IRA? You just can't return money to an IRA if you've taken it out.
#55
Re: IRS & "Tax-Free" UK pension lump sums
Probably starting to get off topic.
JAJ,
I am still pondering the whole USC/ResA thing along with going back to the UK. With USC spouse it looks to be even more complicated because of IRS rules.
nun,
My IRA funds are used to invest in a company that invests in land. Basically I believe we are shareholders/partners. When the land is sold the cash will go back to the company managing the IRA, the investment co reports current value to the IRA manager and they in turn will disburse to me at maturity.
So I guess the tax free lump sum is a waste of time even discussing if you are a UK expat living in the USA. There's a treaty but the IRS is still gonna tax you on everything and that's that. I hope this FACTA/FBAR and worthless Tax Treaty cause some serious financial obstacles or costs for a lot of wealthy US international investors - then maybe things will change for the better.
JAJ,
I am still pondering the whole USC/ResA thing along with going back to the UK. With USC spouse it looks to be even more complicated because of IRS rules.
nun,
My IRA funds are used to invest in a company that invests in land. Basically I believe we are shareholders/partners. When the land is sold the cash will go back to the company managing the IRA, the investment co reports current value to the IRA manager and they in turn will disburse to me at maturity.
So I guess the tax free lump sum is a waste of time even discussing if you are a UK expat living in the USA. There's a treaty but the IRS is still gonna tax you on everything and that's that. I hope this FACTA/FBAR and worthless Tax Treaty cause some serious financial obstacles or costs for a lot of wealthy US international investors - then maybe things will change for the better.
#56
Re: IRS & "Tax-Free" UK pension lump sums
Correct. Even if you abandon your green card, your wife (as a U.S. citizen will still need to file taxes).
So I guess the tax free lump sum is a waste of time even discussing if you are a UK expat living in the USA.
There's a treaty but the IRS is still gonna tax you on everything and that's that. I hope this FACTA/FBAR and worthless Tax Treaty cause some serious financial obstacles or costs for a lot of wealthy US international investors - then maybe things will change for the better.
#57
Re: IRS & "Tax-Free" UK pension lump sums
Tax treaties are designed to prevent double taxation. However they do not prevent a situation if you receive something that is taxable in the United States but not in the United Kingdom. This is the principle among most tax treaties, including other countries as well as the United States. This would apply regardless of FBAR/FATCA.
Thanks for all your input, and if I find out anything that can help anyone in the same situation I'll be sure to post it here.
#58
Re: IRS & "Tax-Free" UK pension lump sums
It's not the tax treaty so much as the way the IRS is a US citizen based tax regime rather than location based like the rest of the world and the tax treaty is skewed to accommodate that fact. What is most irksome is that a pension I established in the UK before I ever came here is now subject to tax on a lump sum distribution that my country of origin allows to be tax free. Taxes on a pension should be due to the country where the pension was established when the funds used to establish and fund it came from that same country.
If you were in Canada, for example, you would also pay (Canadian) tax on the lump sum. No difference, except you could abandon your Canadian tax residence by emigrating from the country, without needing to lose Canadian citizenship. And if you did this before the lump sum was paid, you might be able to avoid Canadian tax. That's generally not possible for Americans, unless you are prepared to renounce U.S. citizenship or your green card.
Many people would never trade U.S. citizenship for a tax concession, but everyone is different.
#59
Re: IRS & "Tax-Free" UK pension lump sums
Wow!!!
An unexpected blast from my past.......
So pardon my diversion from the thread diversion but...
Having just logged on for the 1st time in awhile - I took a double take at the sight of this thread on the list of todays posts. I'm its OP - but - what makes it particularly surreal is that the post from me which begins the thread - just happens to be the 1st message I ever sent in this forum (back in Oct 2011).
Re-reading it now serves to remind me of how and why I originally came to discover BE.com
Until I finally did (on the very day I posted that 1st message) - I'd been blindly floundering, for several months, in a web of ever increasing financial confusion. Here, at last, were some generous, knowledgeable strangers - individuals who were willing to take the time to patiently deal with my queries - and, by so doing, finally clear up that confusion.
And reading the thread also serves to remind that my gratitude for the advice I received is the fundamental reason why I, in turn, will happily try to assist others whenever I feel I may have some relevant experience or insight they might find helpful. (aka: Karma right?)
ok....'nuff of these soppy, sober, serious sentiments......
and back to the fun and joy of "lump (it or leave it) sums", FBARS and double-trouble taxation
An unexpected blast from my past.......
So pardon my diversion from the thread diversion but...
Having just logged on for the 1st time in awhile - I took a double take at the sight of this thread on the list of todays posts. I'm its OP - but - what makes it particularly surreal is that the post from me which begins the thread - just happens to be the 1st message I ever sent in this forum (back in Oct 2011).
Re-reading it now serves to remind me of how and why I originally came to discover BE.com
Until I finally did (on the very day I posted that 1st message) - I'd been blindly floundering, for several months, in a web of ever increasing financial confusion. Here, at last, were some generous, knowledgeable strangers - individuals who were willing to take the time to patiently deal with my queries - and, by so doing, finally clear up that confusion.
And reading the thread also serves to remind that my gratitude for the advice I received is the fundamental reason why I, in turn, will happily try to assist others whenever I feel I may have some relevant experience or insight they might find helpful. (aka: Karma right?)
ok....'nuff of these soppy, sober, serious sentiments......
and back to the fun and joy of "lump (it or leave it) sums", FBARS and double-trouble taxation
#60
Re: IRS & "Tax-Free" UK pension lump sums
What is most irksome is that a pension I established in the UK before I ever came here is now subject to tax on a lump sum distribution that my country of origin allows to be tax free. Taxes on a pension should be due to the country where the pension was established when the funds used to establish and fund it came from that same country.