Re: Taking UK pensions in USA
 

There should be no tax due on the transfer of your pension into a SIPP. Once in the SIPP you need to invest the money appropriately......for you a combination of income and some growth to keep up with inflation might be appropriate. Go to

Bogleheads

and hopefully you'll become confident enough to investing the money yourself and save a bunch in fees and expenses

Re: Taking UK pensions in USA
 

Thanks for that. I appreciate your thoughts and those of anyone else who may want to contribute.

I have a UK ISA and trading account I could transfer my L&G pension fund to a SIPP with them. However they display this warning

"If transferring a pension, please ensure you won't lose any valuable guarantees or other benefits, or incur excessive exit fees."

I also need to discover when is the correct time to transfer the fund..... before I'm 65 or need to do it on my 65th birthday.

Re: Taking UK pensions in USA
 

On your designated retirement date, which for most men is 65, and if you do not want to take an annuity you need to either : 1. opt to leave it with your pension provider for a further period. This is usually 3 years until your 68th birthday. If your fund is performing well and you don't need the money immediately, then this is a worry free option. The thing to remember is that if you withdraw your pension money from a pension fund other than on your designated retirement date or your revised date, your fund will be subject to a "market value deduction" which can be substantial. This is to prevent everyone withdrawing their funds in a falling market.
2. On your retirement date transfer the fund in its entirety to a SIPP. Easy to set up. The new rules from April 2015 do away with the previously capped drawdown and flexible drawdown. The new rule is Flexi-access. In broad terms you can leave your fund in cash, or invest it in any one of thousands of funds. You can even invest in the same funds that your previous fun manager managed. You can withdraw funds under flexi access of which 25% is tax free, and the rest taxed.

I am no great expert in this, but I have been going through the same process in the last few months, so I have a good handle on the options

Re: Taking UK pensions in USA
 

Sorry, I'm lagging a bit on replies.. but

If transferring a pension, please ensure you won't lose any valuable guarantees or other benefits, or incur excessive exit fees."

Usually means, if you are transferring from an occupational fund you will lose guarantees like index linking and maybe spouse pension provisions. The exit fees mostly refer to the market value deduction explained above. If you transfer the value of the funds on your designated retirement date then it should be the exact value of the units on that day with no deduction other than say 25 quid for the bank transfer fee. There is no tax deducted. It is an "in specie" transfer between funds.

Re: Taking UK pensions in USA
 

That's a big help from you guys thanks

One thing others may be interested in.... I discovered when you leave the UK for the next 5 years you can still contribute up to 3600.00 to an existing pension fund. 2880.00 cash plus 720.00 in the form tax relief from HMRC.

I had to have my pension company go over it a few times with their knowledge I was a US resident/citizen. The last thing I want to do take tax relief I'm not entitled to and end up in hot water with HMG.

In my fifth year in the US I took advantage of this rule but through my ignorance I lost out on the previous 4 years relief.

Re: Taking UK pensions in USA
 

Hmmm that's a very good point. One I should get clarification on.

Re: Taking UK pensions in USA
 

But a UK pension plan with no employer contributions is treated for US tax purpose as a foreign grantor trust requiring annual 3520-A and 3520 filing which would put some folks off.

Re: Taking UK pensions in USA
 

Oh boy.........out of the frying pan into the fire

Re: Taking UK pensions in USA
 

That's one interpretation. Another is that a SIPP is a pension fund so you don't have to file the foreign trust forms and get treaty tax exemption on gains.

Re: Taking UK pensions in USA
 

nun wrote: <....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....>

Getting ready to file a claim for the UK basic Pension. Reading a couple of Posts on Ex Pats Boards it appears that filing of of these forms is not always required in order to get the baisc pension paid without deduction of UK taxes ( referring Nutmegger's case).
My situation is a bit different though. I shall be getting a deferral lump sum (in lieu of past couple years pension) in addition to the monthly basic pension going forward. Form 2002 states that UK basic pension is paid without deduction of any taxes at source. Don't know if same applies to the Deferral lump sum ( as opposed to "trivial accumulation pension" Lump sum which, apparently is taxed as PAYE).

Has any one filed these forms so they are exempted from the UK tax deduction at source? I casually browsed the Form 8802 and must say, at first glance I find this form a bit confusing. I dont understand what form 6166 is in Q3 A.

Any comments from nun and others would be greatly appreciated.

Re: Taking UK pensions in USA
 

I've been a US citizen for around a year now originally from the UK. I paid more than enough contributions to be entitled to a full UK gov pension.

About 2 weeks ago I emailed the pension service for information re how my pension would be paid. My two main concerns were, how the payment and currency exchange would be handled, is it paid tax free.

While waiting for a reply i received 2 IPC BR1 application forms from the UK International Pension Center at Wolverhampton, one for myself and one for my US spouse. I was surprised and concerned by how much detail they asked from me of my previous employers and address. So I decided to call them. He was extremely helpful taking time to make sure I understood everything. I explained I had very little memory of all my jobs or home addresses in the UK. He said name, NI number, DOB was really the vital stuff the rest of any info I provided was confirming who I was and not essential.

My wife and I completed both our forms and sent them off. He confirmed my wife would get 60% of my basic state pension. I in turn am in receipt of US SS based on my wife's contributions here.

Here is part of the email I received from his office

"I can confirm that the financial institution responsible for processing all overseas payments made by the Pension Service is Citibank.

All overseas payments are made in the relevant local currency. Citibank receive the payment in sterling and then convert to local currency before they disperse the payment.

Pension payments are sent to Citibank for processing on the dates the payments are due. Foreign exchange rates are booked and applied to pension payments by Citibank on the due date not the day they are credited to the overseas account. This rate is applied consistently to all pension payments made on that date.

Citibank then disperses the payments as appropriate. Dispersal times are subject to the normal operation of the banking industry infrastructure in each country. This is outside of the control of Citibank.

Although the market is volatile and rates change on a daily basis, the Department has negotiated a competitive exchange rate which is more favourable than that available to individuals. Citibank is a global leader in foreign exchange and uses the most liquid interbank data sources for each currency at the time overseas payments are to be made. The bank has transparent foreign exchange pricing which is visible on Reuters and Bloomberg and is regularly audited by independent auditor KPMG.

Charges –

Citibank does not charge an administration fee for issuing payments to customers living overseas. However, banks are commercial organisations and it would not be reasonable to expect them to provide such a service completely free of charge. Citibank is a global leader in foreign exchange and is able to buy currency at the most liquid inter-bank rates. This enables them to recoup some of their costs for making overseas payments and, at the same time, provide our customers with a very competitive rate of exchange that would not be available to individuals if they went to the market themselves.

No tax is deducted at source from United Kingdom State Pension."

So for tax purposes all that's required is to declare payments to the IRS.

I was concerned because I bank with a credit union which has no IBAN number. Not a problem, their routing number is fine.

There web site is a great help too.

https://www.gov.uk/state-pension-if-you-retire-abroad

Just one other thing to mention, any pensions from foreign governments have to be declared to US SS which could mean a reduction in US SS benefits to both husband and wife. We intend to visit our local SS when UK pension payments begin.

A bit long winded but I hope it's of some use to others about to find themselves in a similar position.

Re: Taking UK pensions in USA
 

Very informative Vulcan, thanks.

Re: Taking UK pensions in USA
 

Thanks for the link

Re: Taking UK pensions in USA
 

A little more info for those retiring in the near future.

As I mentioned earlier I've claimed SS retirement benefit since 62 based on my wife's SS contributions. Last week I received my Medicare card which starts on the 1st of the month I reach 65. Issued automatically at 65 to anyone already in receipt of SS . If you're not receiving any SS then apply for Medicare membership a couple of months before you hit 65.

I now need to take care of part D which I think will be on my wife's employer insurance.

Re: Taking UK pensions in USA
 

Note that it is not just your credit union that does not have an IBAN number; US banks do not use them.