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QROPS....once and for all, does this work?

QROPS....once and for all, does this work?

Old May 29th 2012, 4:04 am
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Default Re: QROPS....once and for all, does this work?

I have my Bank Account since I was 17 (a loooooong time ago), I could be wrong but I do not think they go out of their way to ask all their existing customers if the are US Resident for tax purposes. Habitual?

I have a feeling I am not alone in keeping many of my accounts using a UK address.
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Old May 29th 2012, 4:06 am
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Default Re: QROPS....once and for all, does this work?

Just an add on tax and Permanent residence are not synonymous.
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Old May 29th 2012, 9:15 am
  #33  
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Default Re: QROPS....once and for all, does this work?

Originally Posted by Boiler
I have my Bank Account since I was 17 (a loooooong time ago), I could be wrong but I do not think they go out of their way to ask all their existing customers if the are US Resident for tax purposes. Habitual?

I have a feeling I am not alone in keeping many of my accounts using a UK address.
If you tried to open a new account you would probably be asked if you are a US resident or US citizen. Also for pensions you need to declare yourself as US resident to have them paid free of UK tax. You could have UK tax withheld at source and take a tax credit on your US taxes. But to claim any excess UK tax back you would once again have to declare yourself as US resident.
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Old May 29th 2012, 8:20 pm
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Question Re: QROPS....once and for all, does this work?

So, based on the fairly common assumption on this forum that QROPS either does not work or is not a good option....how is one supposed to get their money from a UK pension plan when retirement comes knocking.
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Old May 29th 2012, 9:18 pm
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Default Re: QROPS....once and for all, does this work?

Paid into UK account.

Transfer to US.
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Old May 29th 2012, 9:22 pm
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Default Re: QROPS....once and for all, does this work?

Originally Posted by Boiler
Paid into UK account.

Transfer to US.
I know there is a 25% tax-free payout in a lump sum. What is the best way to get at the remaining 75%..??

Is it as simple as taking regular payments into a UK bank account..??
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Old May 29th 2012, 11:45 pm
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Default Re: QROPS....once and for all, does this work?

Originally Posted by davenay67
I know there is a 25% tax-free payout in a lump sum. What is the best way to get at the remaining 75%..??

Is it as simple as taking regular payments into a UK bank account..??
If you are US resident the 25% tax fee lump sum does not apply. All your UK pension income is Taxable in the US. Income from your UK pensions can be paid free of UK tax if you file a US-individual-2002 with HMRC. They will then give you a PAYE code that will make your UK tax zero. Then you have to work with your pension provider to have your income deposited into an appropriate account.

If you don't go this route and pay UK tax you will have to claim a FTC on your US taxes and then claim any excess tax back from HMRC.

If your pension provider wants you to move your money because you are a US resident or citizen you will be in a difficult situation as it will be difficult to move your money to another UK provider, you can't move it to the US without cashing it in and a QROP will be expensive and may well further complicate your US taxes. I'd hope that UK financial authorities, HMRC etc would offer some practical advice if you found youself in that Catch 22 situation

Last edited by nun; May 29th 2012 at 11:48 pm.
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Old May 30th 2012, 2:04 pm
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Default Re: QROPS....once and for all, does this work?

Originally Posted by nun
If you are US resident the 25% tax fee lump sum does not apply. All your UK pension income is Taxable in the US. Income from your UK pensions can be paid free of UK tax if you file a US-individual-2002 with HMRC. They will then give you a PAYE code that will make your UK tax zero. Then you have to work with your pension provider to have your income deposited into an appropriate account.

If you don't go this route and pay UK tax you will have to claim a FTC on your US taxes and then claim any excess tax back from HMRC.

If your pension provider wants you to move your money because you are a US resident or citizen you will be in a difficult situation as it will be difficult to move your money to another UK provider, you can't move it to the US without cashing it in and a QROP will be expensive and may well further complicate your US taxes. I'd hope that UK financial authorities, HMRC etc would offer some practical advice if you found youself in that Catch 22 situation
Thanks, Nun..!!

I'm not being asked to move my accounts (yet). I am simply wondering what the best way would be to access my UK pension funds when retirement age rolls around.

There isn't exactly a fortune in my UK account, so it's not a huge tax implication, but it's always best to avoid unnecessary tax where possible.

What is FTC..??

Thanks..!!

Dave.
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Old May 30th 2012, 2:55 pm
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Default Re: QROPS....once and for all, does this work?

Some schemes have an automatic cash payout, usually the 80ths.

Chances are that where it is optional it would be a good idea not to take it.

My guess is that most people with small pensions just take it in the UK and forget the US aspect.
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Old May 30th 2012, 4:43 pm
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Default Re: QROPS....once and for all, does this work?

Originally Posted by davenay67
What is FTC..??

Thanks..!!

Dave.
Foreign Tax Credit
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Old May 31st 2012, 10:29 pm
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Default Re: QROPS....once and for all, does this work?

Originally Posted by nun
...you can't move it to the US without cashing it in...
Is this even possible? I thought regardless of whether you would like to pay the deferred tax, pay a penalty, etc, it simply wasn't possible to get to the money or move it out of the country.

I have a piffling little pot of money from a couple of years of UK working, the sort of pension that's going to pay me about $50 a year in 25 years' time, and would LOVE to just get shot of it to avoid having to report the darn thing for the next 2-3 decades!

Most of the money's from protected rights, though (opting out of SERPS/ State Second Pension in the early 90s), so I imagine it's even more complicated with that..?
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Old Jun 1st 2012, 12:03 pm
  #42  
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Default Re: QROPS....once and for all, does this work?

Originally Posted by kodokan
Is this even possible? I thought regardless of whether you would like to pay the deferred tax, pay a penalty, etc, it simply wasn't possible to get to the money or move it out of the country.

I have a piffling little pot of money from a couple of years of UK working, the sort of pension that's going to pay me about $50 a year in 25 years' time, and would LOVE to just get shot of it to avoid having to report the darn thing for the next 2-3 decades!

Most of the money's from protected rights, though (opting out of SERPS/ State Second Pension in the early 90s), so I imagine it's even more complicated with that..?
I'm not familiar with pension and retirement account rules in the UK. You should talk to your UK provider about options.

The way you move a UK pension is through a QROP, but that's not an option for the US if you want to maintain the tax deferred nature of the pension. If you could find someone in the US to accept the QROP you'd have the money in the US, but you'd have to pay US tax on it and I have no idea how the UK would deal with it.
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Old Jun 3rd 2012, 5:16 am
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Default Re: QROPS....once and for all, does this work?

I've read the thread with confused fascination.

Here's a Question. Can I close my UK stakeholder pension fund account? Transfer the money to a US bank account and just take on the chin any resulting tax liability?
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Old Jun 3rd 2012, 12:40 pm
  #44  
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Default Re: QROPS....once and for all, does this work?

Originally Posted by redv
I've read the thread with confused fascination.

Here's a Question. Can I close my UK stakeholder pension fund account? Transfer the money to a US bank account and just take on the chin any resulting tax liability?
I think you can only cash in UK pensions if their value is very small.....something like 1% of the maximum amount you could have in them before you incur tax ,that's 18000 GBP this year, and you can't do it before age 60. Please check this with your pension provider.

This attitude in the UK is far different from the US. In the UK you are forced to buy annuities to fund retirement and there are lots of barriers to getting at your money. In the US the only barrier is the 10% early withdrawal penalty and you can even get around that by taking money out on an annuity schedule. Once you reach 59.5 you can do whatever you like with your money, you just have to pay income tax on any withdrawals.

So the answer to your question is probably that you can only cash in you UK pension if the value is under 18k GBP and you are over 60. However you do get the 25% UK tax free lump sum which you can transfer to the US and pay US income tax on.
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Old Jun 3rd 2012, 12:47 pm
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Default Re: QROPS....once and for all, does this work?

Originally Posted by nun
I think you can only cash in UK pensions if their value is very small.....something like 1% of the maximum amount you could have in them before you incur tax ,that's 18000 GBP this year, and you can't do it before age 60. Please check this with your pension provider.

This attitude in the UK is far different from the US. In the UK you are forced to buy annuities to fund retirement and there are lots of barriers to getting at your money. In the US the only barrier is the 10% early withdrawal penalty and you can even get around that by taking money out on an annuity schedule. Once you reach 59.5 you can do whatever you like with your money, you just have to pay income tax on any withdrawals.

So the answer to your question is probably that you can only cash in you UK pension if the value is under 18k GBP and you are over 60. However you do get the 25% UK tax free lump sum which you can transfer to the US and pay US income tax on.
Some of it might be considered income.
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