fatbrit

For my sins, I have small local government pension festering away in Blighty. Previous attempts to xfer it to an offshore SIPP were scuppered because the charges were to high to sustain such a small investment.

Details as follows: membership of scheme terminated in 1990; current value (statement of August this year) gives me a whopping pension of ~ GBP 1,100/yr and a lump sum retiring grant of ~GBP 3,100; I’m a tad over 40. There seems to be some problem with parts of it protected behind the chancellor’s barbed wire. I was told that this would have to be locked away in a savings account and could not be transferred to a SIPP.

Not surprisingly, none of this is part of my retirement planning. However, I hate lose ends. Current plan is to blow it away after I retire on a fortnight holiday in Blighty. Ideally, I would love to xfer it to a US IRA. What are my options?

Elvira

Do you really mean 'current' value (as opposed to projected value)?

If the former, it could grow into a nice little pot over the next 20 years or so. If the latter, needless tosay, it's likely to be little more than pocket-money...

fatbrit

Yep -- thanks Donna. That's current value. It grows every time they send the annual statement out. The last one reports an increase of 30%, no less!

Elvira

Okay, so it's linked to the stock market in some way, right?

Why not use a pension calculator (e.g. Motley Fool) to work out how much it's likely to be worth when you retire. Play around with different projections - conservative, 'realistic', optimistic.

http://www.fool.co.uk/school/calculators.htm

For instance, GBP 3200, with 8% growth over 23 years, would give you £18,789.

The name's Elvira, BTW

Tony Mullaney

OK ! The some of it that is in a bank account is called your protected rights, you are at this time correct you may not touch this, however you might be able to in April next year, the pension you have quoted is low but we work on transfer values if your transfer value is greater than 15k not including protected rights you can move it to a better place but it has to stay in the UK , If on the other hand the value is less than 15K as of April next year you will be able to cash it out and put it into your US pension if you wish.
For me to look into this further we would need to discuss in private and I would have to have MY letter of authorisation signed by you to find out a current transfer value, this does not cost you anything.

You have more than 20 years before you will retire, a good small pension invested wisely could be a desent pension in 20 odd years or it maybe worth looking at cashing and investing in you US pension. We will not know untill we know the transfer value.

[email protected]

fatbrit

No idea how they do it! Perhaps our expert can enlighten us if he isn't to busy spamming for other customers?

It's certainly had good growth in recent times, but I have no control over it and it is located in a country where I chose not to live. I think it's probably at a silly size: too small to forget and not large enough to generate excitement.

Sorry about name confusion -- seen you post about it before but couldn't remember.

Elvira

Well, the 30% return you quote for last year is typical of 'standard' stock markets funds for last year. So I would imagine that your pension is likely to be linked to stock market investments - either directly or indirectly (e.g. via a 'With Profits' fund). [NB: The latter are generally considered to be 'not a good idea' - but I expect you knew that...)

Maybe you can dig out the literature they gave you when you joined the scheme? (or ask for it now, if it got lost in the move )

Apart from the Motley Fool, I find the Vanguard site useful for financial information. They're a good company also because their charges are so low (just in case anyone here in the US wants to start an IRA or invest in a mutual fund, without spending endless hours brooding over the Wall Street Journal and the like - life's too short, as far as I'm concerned... )

[BTW, I realize now that Donna Elvira was a poor choice for a user name, but it was the first thing that came to my mind when I signed up, having just listened to 'Don Giovanni'. Anybody know how I can change to plain 'Elvira' - even though I'm a lady I don't really need a title... )

fatbrit

Okay, thx.

Expanding, if I understand you correctly, after April next:
a pension value of < GBP 15k may be xfer out of the UK
a pension value of > GBP 15k must remain in the UK

Q's
1/ For xfer out to US, what are the US and UK tax consequences for a PR/USC?
2/ For xfer to the US, what would be a suitable vessel to hold the dosh?
3/ For pensions remaining in the UK, what vessel would hold the dosh? Please include an estimate of costs.
4/ Please expand on the holding account for the protected portion, especially costs.
5/ Is there any difference between lgps and other UK company pension schemes?

Elvira

I always thought that government pensions are index-linked, i.e. not directly linked to the stock market, btu yours seems to be different. But I guess you really need to look at the bumf relating to your scheme.

fatbrit

Yep -- I should really. I'm going to see if they've got a web site.

Not really having much of the way of dealings in UK finance for the past fifteen years, I really have little or no idea what goes on there. It's bad enough understanding it over here!

Tony Mullaney

-15k you would be able to cash it out as of April 06, you can use the cash as you wish "this point is to be clarified in April"

+15k you will have to leave it in the Uk as is or in a SIPP (benefits of a SIPP are many including flexible retirement date and choice investments)

This is to be made clearer by April, But we understand that you will be taxed on all monies from a "cash in" as a none UK tax payer you will be able to claim it back. Thus it is tax free ??

It would be best to reinvest your pension into a pension over here
(" I can not advice" ) rather than blow it on a BOAT.

SiPP is the way forward in the UK I can not advice as to costs as I have not a transfer value on your pension.

We use Carter Allen for holding of protected rights ( part of the Abbey National) all banks have to pay the same interest. around 3%.

This last question is bigger than you could imagine ie; is it 60ths 80ths 50ths final salary or ??????. Part of my search.

One last point if you choose to leave it as is or transfer to a SIPP when you come to collect your pension you choose to pay tax UK/USA and your lump sum will still be tax free.
Death Benefit on frozen pensions is little or none.

[email protected]

Bob

PM either Paul or Sue...

fatbrit

How will the IRS view it?

So you won't be able to pull it in to a standard IRA, for example? But a Roth shouldn't be a problem. But then you're taxed at pull time.

Most UK SIPPs seem to exclude non residents.

US pensions are far superior in this respect.

Elvira

I thought the point of a Roth IRA is that you fund it out of taxed income but do NOT pay tax when you take the income in retirement?

BritGuyTN

this is correct and i think you can take cash out whenever without penalties - unlike a 401k

roth ira's however do have a income limit - if the joint household income is more than $150k you cannot get one - but you can still get a normal IRA

this new UK pension rule cold be cool - i have a small pension fund still in the UK that I could use to pay off a chunk of my car loan over here