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UK Based Pension

UK Based Pension

Old Aug 24th 2021, 2:49 pm
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Default UK Based Pension

Hi folks, I was reading with interest about the 25% lump sum from UK pension. My circumstances are a bit different. I live in the USA, Green Card holder. When I retire I am looking to spend some of the year in the USA and some of the year in the UK. I have USA based pension, which I will use when I am in the USA and the UK Pension I would spend when in the UK. This means I am not looking to transfer pension from UK to USA, rather leave the pension in the UK and paid into UK Bank Account. I would like to take the 25% lump sum and use this to purchase property in the UK. Ideally as my UK Pension is a final salary pension converting to a SIPP sounds attractive, but I don't want to go with the myriad of offshore SIPP providers over which there is no regulatory control. I can see there is a whole mass of tax implications I am going to be subject to as well. Advice welcomed!
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Old Aug 24th 2021, 3:13 pm
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Default Re: UK Based Pension

Originally Posted by sjbarker1 View Post
Hi folks, I was reading with interest about the 25% lump sum from UK pension. My circumstances are a bit different. I live in the USA, Green Card holder. When I retire I am looking to spend some of the year in the USA and some of the year in the UK. I have USA based pension, which I will use when I am in the USA and the UK Pension I would spend when in the UK. This means I am not looking to transfer pension from UK to USA, rather leave the pension in the UK and paid into UK Bank Account. I would like to take the 25% lump sum and use this to purchase property in the UK. Ideally as my UK Pension is a final salary pension converting to a SIPP sounds attractive, but I don't want to go with the myriad of offshore SIPP providers over which there is no regulatory control. I can see there is a whole mass of tax implications I am going to be subject to as well. Advice welcomed!
If you have a green card you are a US PR and taxed on your worldwide income. You already have to report all your assets and world wide income on tour tax return and FBAR every year anyway.

The US does not have the concept of remittance based tax like the UK… I closed all my offshore accounts before moving to the US because they don’t really benefit a “US person”. So in short not bringing the 25% to the US will not change the tax implications. Any tax due will be triggered when you receive the 25% anywhere.

Depending how much time you plan to be in the UK you may want to consider becoming a USC so you don’t risk looking your GC, something like CVxx or an ash cloud could impact travel and have you stay away to long to maintain your PR and hence loose your Green Card.

Last edited by tht; Aug 24th 2021 at 4:20 pm.
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Old Aug 24th 2021, 4:27 pm
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Default Re: UK Based Pension

Tax residency is going to be the issue, not where you spend the money. Presumably you will arrange things so your Green Card is not in danger and so will limit your time in the UK. As a Green Card holder you will face all the usual US tax issues with foreign pension income and you will have to declare the income and pay US tax. If you can avoid being UK tax resident it will make your life far simpler.

You are sensible to avoid offshore SIPP providers as they won't offer any tax simplification and could make things even more complicated.
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Old Aug 24th 2021, 5:10 pm
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Default Re: UK Based Pension

Is your pension a Government Service pension by any chance?
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Old Aug 24th 2021, 5:33 pm
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Default Re: UK Based Pension

Originally Posted by lansbury View Post
Is your pension a Government Service pension by any chance?
Trouble maker ;-)
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Old Aug 24th 2021, 5:47 pm
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Default Re: UK Based Pension

No private occupational and then I will qualify for UK State Pension.
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Old Aug 24th 2021, 8:21 pm
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Default Re: UK Based Pension

The challenge in transferring your final salary pension to a SIPP will be getting the legally required advice from a UK certified IFA if your pension pot exceeds 30,000 GBP. It is almost impossible to find a UK certified IFA to provide this advice to US residents for a variety of reasons but there are a handful of international advisors who can arrange for the advice and then transfer to an international SIPP. These advisors only work with international SIPPS so you have to go that route at least initially. However you can then transfer your international SIPP to a UK SIPP provider, but I believe the only one left that will work with US residents is A J Bell.

Transferring from an international SIPP to a UK SIPP is relatively straight forward with minimal fees. However, the international advisors will charge approximately 3% of your pension pot to do the initial transfer to the international SIPP, and you will also be required to pay about 2,000 GBP (more if your pot exceeds 250,00 GBP) for the legally required advice. You should think long and hard before transferring a final salary scheme but that is why the advice is required. IMO the process is safe so long as you choose a UK regulated international SIPP. I did it this way and it took about 3 months to do the initial transfer (that was at the peak of Covid in Q2 of 2020) and about one week to do the subsequent transfer to A J Bell. I had no tax issues associated with using an offshore provider, versus A J Bell. The reporting requirements were exactly the same.

If you have a UK address and you are not a US citizen you may be able to find a UK IFA willing to work with you but if you mention that you are resident in the USA you will find that they drop you like a hot potato.


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Old Aug 24th 2021, 8:43 pm
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Default Re: UK Based Pension

Originally Posted by Glasgow Girl View Post
The challenge in transferring your final salary pension to a SIPP will be getting the legally required advice from a UK certified IFA if your pension pot exceeds 30,000 GBP. It is almost impossible to find a UK certified IFA to provide this advice to US residents for a variety of reasons but there are a handful of international advisors who can arrange for the advice and then transfer to an international SIPP. These advisors only work with international SIPPS so you have to go that route at least initially. However you can then transfer your international SIPP to a UK SIPP provider, but I believe the only one left that will work with US residents is A J Bell.

Transferring from an international SIPP to a UK SIPP is relatively straight forward with minimal fees. However, the international advisors will charge approximately 3% of your pension pot to do the initial transfer to the international SIPP, and you will also be required to pay about 2,000 GBP (more if your pot exceeds 250,00 GBP) for the legally required advice. You should think long and hard before transferring a final salary scheme but that is why the advice is required. IMO the process is safe so long as you choose a UK regulated international SIPP. I did it this way and it took about 3 months to do the initial transfer (that was at the peak of Covid in Q2 of 2020) and about one week to do the subsequent transfer to A J Bell. I had no tax issues associated with using an offshore provider, versus A J Bell. The reporting requirements were exactly the same.

If you have a UK address and you are not a US citizen you may be able to find a UK IFA willing to work with you but if you mention that you are resident in the USA you will find that they drop you like a hot potato.
I'd be careful doing a cross border transfer of the SIPP to make sure that it has no US tax implications n.b. it almost certainly does. You will need to take experienced and impartial international tax advice and I bet that they will advise against it if you are a US resident or citizen. The path of least resistance is to leave the pension in the UK and if you can keep it as a DB plan and take regular income you should keep your 25% tax free amount in US and make life as simple as it can be.
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Old Aug 24th 2021, 9:45 pm
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Default Re: UK Based Pension

There are no tax implications transferring to an international SIPP, other than the usual FBAR and Form 8938 requirements that apply to all pension funds no matter where they reside. The tax implications are when you withdraw the funds and again the same rules apply no matter where you pension resides. The advice examines your personal circumstances. I am a US resident and dual citizen and my advice was to transfer out of the DB scheme. Interestingly, some of the reasons supporting the transfer were the complexities and nuances of having income from both the UK and USA, but there are many other personal factors that determine whether or not it is a good idea.
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Old Aug 24th 2021, 11:34 pm
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Default Re: UK Based Pension

Originally Posted by Glasgow Girl View Post
There are no tax implications transferring to an international SIPP, other than the usual FBAR and Form 8938 requirements that apply to all pension funds no matter where they reside. The tax implications are when you withdraw the funds and again the same rules apply no matter where you pension resides. The advice examines your personal circumstances. I am a US resident and dual citizen and my advice was to transfer out of the DB scheme. Interestingly, some of the reasons supporting the transfer were the complexities and nuances of having income from both the UK and USA, but there are many other personal factors that determine whether or not it is a good idea.
Yes, sorry I was thinking of QROPS, if the transfer takes place between two pension funds within the same country there should be no taxable event. However, if the transfer is across a border then it would not be covered by a US tax treaty and it would be a US taxable event.
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Old Aug 25th 2021, 10:50 am
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Default Re: UK Based Pension

Originally Posted by nun View Post
Yes, sorry I was thinking of QROPS, if the transfer takes place between two pension funds within the same country there should be no taxable event. However, if the transfer is across a border then it would not be covered by a US tax treaty and it would be a US taxable event.
Yes looked at QROPS, you lose a LOT of your pension pot with that, although again I don't want to transfer my pension out of the UK. I am looking towards keeping the final salary pension and take lump sum. I have been looking at the extensive 25% lump sum tax implications in another thread, but a simple question here. Does anyone know if you can spread the 25% lump sum, say 5% per year over 5 years? In that way you can smooth out the tax overheads.
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Old Aug 25th 2021, 11:26 am
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Default Re: UK Based Pension

Agree that QROPS is a very bad option. The international SIPP that I transferred to is an independent branch of a well known UK financial company. Although it is legally independent from the parent company, the international SIPP is registered in the UK, is UK regulated and is managed in the UK.

The only way I know of to take your lump sum in pieces is via drawdown. Unless your final salary scheme offers that option you would need to transfer the amount to one of the UK pension companies that accept transfers and offers a drawdown option. Most of them will do so, but not if you are a US resident. Unfortunately, the FATCA laws made it too risky for almost all UK financial companies to deal with anyone who resides in the USA or is a US citizen. Thus our options when trying to do anything with a final salary scheme pension, other than take the lump sum and/or the defined pension are extremely limited.
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Old Aug 25th 2021, 11:27 am
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Default Re: UK Based Pension

Originally Posted by Glasgow Girl View Post
There are no tax implications transferring to an international SIPP, other than the usual FBAR and Form 8938 requirements that apply to all pension funds no matter where they reside. The tax implications are when you withdraw the funds and again the same rules apply no matter where you pension resides. The advice examines your personal circumstances. I am a US resident and dual citizen and my advice was to transfer out of the DB scheme. Interestingly, some of the reasons supporting the transfer were the complexities and nuances of having income from both the UK and USA, but there are many other personal factors that determine whether or not it is a good idea.
I'm not sure what you mean by an international SIPP, but if it is not a "pension scheme" in the UK or US then there are problems. Although not definitive, see the attached from the IRS Chief Counsel.
(Edit: posted before I saw the explanation in #11. Still others need to be very careful)
Attached Files
File Type: pdf
International SIPP.pdf (101.6 KB, 31 views)

Last edited by MidAtlantic; Aug 25th 2021 at 11:33 am.
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Old Aug 25th 2021, 12:39 pm
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Default Re: UK Based Pension

Originally Posted by MidAtlantic View Post
I'm not sure what you mean by an international SIPP, but if it is not a "pension scheme" in the UK or US then there are problems. Although not definitive, see the attached from the IRS Chief Counsel.
(Edit: posted before I saw the explanation in #11. Still others need to be very careful)
Yes that letter points out the US tax problem with cross border transfers. It is non comital on the actual status of a SIPP as far as the IRS is concerned.
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Old Aug 25th 2021, 1:24 pm
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Default Re: UK Based Pension

Originally Posted by nun View Post
Yes that letter points out the US tax problem with cross border transfers. It is non comital on the actual status of a SIPP as far as the IRS is concerned.
In my view a SIPP clearly falls within the definition in the Treaty Article 3, 1 (o), so I'm not sure it matters that they are non-committal.
They were not asked that question so I am not surprised that they did not answer it.

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