vulcan

Retired, now a US citizen living in the USA, next year I start receiving my UK government pension and would be interested in how those of you who are retired are handling it.

Does the UK pension service send it direct to a US bank account? What sort of charges arise from that and how much does the rate vary from spot rate.

Do any of you get it paid into a UK bank and move the money yourself? If so what method do you use to convert and make the transfer.

Any information or your experiences on handling this would be appreciated.

Nutmegger

I get it paid directly into my US bank account in dollars -- no fees, just shows up automatically every quarter (it's very small, so my choice to only get it four times a year). A very simple process.

lansbury

I get mine paid into a UK bank, as is my wife's. We also have three other pensions paid into the same account. I use World First to have the money transferred periodically, usually when the exchange rate is above $1.60. If it is below I leave the money in the UK.

I do it this way for two reasons 1) We have a number of pensions and 2) I have some control over the amount of dollars I receive and can minimize the effect of exchange rate fluctuations. It doesn't cost me anything to do it this way as I have a US bank account with free wire transfers. If it was just one UK State pension I would have it paid direct, the rate fluctuations wouldn't make a lot of difference.

robin1234

My wife gets her British state pension paid four times a year into our offshore pounds sterling account on the Isle of Man. We use this account for spending money when visiting the UK.

MidwestBob

I have my UK Government pension paid monthly into an account at Nationwide
Isle of Man. Like a previous comment, you can then either leave it in pounds until you are happy with the $/Gbp exchange rate and then change it and transfer it to the US or move it into a US $ account in the same bank.

vulcan

Thanks for the response. I'm guessing the currency is converted by HMG before transfer? How does the rate you get compare to the spot rate on or around the day it goes into your account?

vulcan

I have a small private pension which I'm thinking of delaying taking do to current poor annuity returns. Over recent years the forecasted income has been falling in line with interest rates despite the fund value increasing some 40%.

If the £/$ spot rate isn't too far from HMG's actual rate I'm thinking of taking the state pension monthly direct to my USA bank. However if HMG sends £s not $s and the receiving bank does the conversion I'm not confident of getting a fair rate.

Thanks to everyone else that's replied

Nutmegger

As I mentioned, the pension is deposited directly to the US account in dollars.

vulcan

Thanks

MidwestBob

Vulcan, don't wait for the annuity rates to improve any time soon. Open an expatriate Sipp with Youinvest and transfer your small private pension. You can then reinvest it, or from April 2015 you will then be able to take some or all of it on flexi-access. Be careful to transfer it exactly on your designated retirement date held by the pension company or you pension company may take an adjusted value deduction

nun

If your pension is the UK state pension HMRC will deposit it directly into your US account. There is no UK tax on it when paid to a US tax resident. You will have to pay US tax on it and treat it just like a foreign pension, ie. it goes on line 16 of the 1040. If the pension is from UK Government service (like an army or civil service pension) different rules apply.

How a UK private pension is paid will depend on the administrator, you need to talk to them directly. There should also be no UK tax on it, but you will have to pay US tax on it, again as a foreign pension entered on line 16.

You will need file a certificate of US residency, form 8802, and a US-individual 2002 to make sure HMRC your pensions are paid free of UK tax.

http://www.irs.gov/pub/irs-pdf/f8802.pdf

http://www.hmrc.gov.uk/cnr/us_individual_2002.pdf

If any of the UK pension was paid for with non-SS earnings (ie from income you earned while in the UK) you should see if it will reduce any US SS you might get because of the Windfall Elimination Provision. If any of the UK state pension is from voluntary national insurance contributions it won't count towards WEP and if those contributions were from already taxed US income you should calculate the tax free US basis in the UK state pension.

nun

If you do this make sure you are comfortable with the arguments and documentation you would provide the IRS if they were to audit you and ask why the transfer should not be taxed.

MidwestBob

Hi Nun, the advice I got was that as it was an "in specie" transfer from one pension provider to another private pension then it was no different to transferring your USA 401k to another provider. There is still limited access to withdrawals from a Sipp provider and any withdrawals are taxed at UK rates and off course must be declared on your 1040 with credit for the tax already paid.
If you know something different I would be pleased to hear it.

nun

Yes that is definitely what I would argue. Just make sure you understand the argument because you are relying on the US/UK tax treaty and that you make any new FBAR or FATCA filings required. Also, if you are a US tax resident, withdrawals from your UK pensions will not be taxed in the UK, just in the US.

vulcan

There are probably others besides me hitting or have hit 65 around this time and......... although the pension fund has risen substantially in value the projected income has been falling at a greater rate mostly due to falling interest rates.

If you've retired in recent years, have you been able to mitigate this problem? If like me your retirement date is looming do you have any ideas on how to deal with this?

I'm inclined to delay taking my small private pension and leave it under the pension fund manager. Although I am managing it to a certain extent in that I can choose from a limited list of funds it's in.

I'm not confident I could beat the professionals if I tried to take over full management.

One thought would be to some way get the fund out of the pension fund manager so avoiding an annuity purchase. Get it into mutual funds that target high dividend investments and take income from that. The problem there might be the impact of taxation to the fund value if it's moved

Any thoughts?

A difficult problem for a lay man