md95065

There is no reason why the US revenue code should appear to you to be either reasonable or logical.

The annual amount that can be contributed to a 401K plan is limited, the contributions are tax deferred and come from earned income and distributions from the plan are treated as taxable income. Those rules do not allow for the possibility of injecting a lump sum from a foreign pension scheme into a 401K nor do they cover the issue of who should collect the taxes on distributions related to that lump sum.

The web site isn't a lobbying organization - if you care about this enough to organize a petition then by all means go ahead and start one but don't expect someone else to do it for you.

taipan624

So is the amount you can put into a UK Pension from income, and the tax is also deferred, I do not see where you are coming from. The UK see fit to allow a transfer, this is nothing more than an oversight that the IRS cannot be bothered to change. I spoke with an attorney in Washington that is responsible for writing tax law for the IRS and she could so no reason for the exemption.

Another example of bureaucracy working against the average citizen. As for a petition it seems to me that this site having a data base of ex pats would be the ideal platform for raising a petition despite what you think.

md95065

Where I am coming from is the fact that while the UK and US schemes are similar in nature and intent they are still different. Heck you normally can't even transfer money from one 401K plan into another if you change employers - you either keep it as a separate 401K or convert it to a rollover IRA.

So, yes, of course the US could craft legislation to allow this to be done for UK pension schemes (and French and German and Italian and Canadian and Mexican and Australian pension schemes ...) they just haven't chosen to do so

Yes, and if you take the trouble to start such a petition I am sure that you will find people here who will support it. What I took exception to was the fact that you appeared to want someone else to do all of the work for you.

You didn't say "I am going to organize a petition about this", you said:

celticgrid

I disagree. The average citizen is totally unaffected by the problem you reference.

ExUKEmployee

I am also trying to successfully transfer UK pension funds into a QROPS registered fund in the US with no luck. I would like to move the money from the UK pension to a US-based IRA or 401(k) in order to eventually stop having to file tax returns in both the US and UK. I assume when my UK pension starts paying out I would have to start filing in both countries again. Does anyone know if that is the case? Thanks, Paul

nun

There are no QROPS registered funds in the US. It is NOT possible to transfer UK retirement funds into US based retirement funds.

If you are a US resident all gains in UK pension funds are US and UK tax deferred and you won't have to pay UK tax on payments from a UK based pension. Also the only UK tax form you have to file is a US-Individual-2002 which confirms your US residency and the UK tax free status of you pension payments.

MMcD

I know (from my own direct, personal experience) that that's definitely NOT the case!:
At the end of 2011 I converted a personal pension fund in UK to an Annuity there.
This year (2012) I converted an additional 2 personal pension funds in UK to Annuities.
I also began receiving payments from my UK State Pension.
As I am RESIDENT in US (and not UK) I was not required to file any tax forms there either last year or going forward. NONE!

Lest there be any doubt - what Nun says is absolutely correct
1) I, too, looked into QROPS. Yes...."when there's a will, there's a way"....except when there isn't!
And there isn't!
2) I just filed my US-Individual-2002 (fyi: This is a form which ultimately gets filed with HMRC - but via the US Dept. of Treasury. They require that you mail or fax it to them together with IRS form 8802 and proof of payment of the $85 fee for their Certification to HMRC that you are a US Resident (and therefore not liable for any taxation in UK)

In summary - yes, this is mind-numbingly crazy making
But hey....grin 'n bear it .....because....
.....well because that's just the way it is!

nun

The US treatment of SIPPs and NEST funds are uncertain. Some tax professionals claim they are covered under "pensions" in the treaty and some do not. They are an area where expert advice is recommended.

Cook_County

The tricky part is now that the IRS will be told about the personal pension on Form 8938 and it is impossible to fill the form in withiut identifying it as a foreign trust.

nun

Whether 8938 is required will depend on the value of the pension, but anyone with a UK pension should already be dealing with it appropriately for US tax purposes. That might be ensuring that a treaty position is appropriate or using UK tax credits to cover US tax on any gains absent the treaty to build up a US tax free basis......the second strategy is most advantageous if you retire in the US.

Hotscot

Could you please elaborate a wee bit...?

nun

UK retirement accounts do not have tax deferred status under IRS regulations. However, the US/UK tax treaty allows certain UK pensions to grow tax free until income is taken. US citizens and residents should determine how their UK pension funds are covered by the treaty and also understand how they are taxed if they are no covered. If they at not covered foreign trust and PFIC will probably be applicable. Professionals often disagree about the exact status of UK retirement finds like SIPPs, but final salary pensions while he covered by treaty.

Hotscot

Thanks!

Slartybardfast

Try this: A list of 2013 HMRC approved QROPS...

http://www.hmrc.gov.uk/pensionschemes/qrops.pdf

I don't know what the procedure is for transferring, but at least it shows there are approved schemes in the USA.

ian-mstm

Did you read posts #4 and #5 in this thread?

Ian