alexgwoodruff

Hello all,

Apologies firstly, I have not conducted a search to see if this is answered somewhere else. I wanted to get my questions written before the details of my recent encounter starts to leave my memory.

Background: My wife and I emigrated to the US in 2004. In the first year we closed out all of our accounts in the UK leaving nothing behind except a couple of company pensions.
I worked for LLoydsTSB for 4 years and the NHS for 8 years. I recently found out that I could have my UK pensions valued and rolled over to the US, so long as they rolled into a QROPS fund. I spoke to my financial advisor a couple of months ago to see if he could advise me to a product that would suit my needs. We are talking SMALL pensions. The LloydsTSB is 500 pounds a year. I have no idea what the NHS pension is.
My financial advisor referred me to a global tax expert, who has just told me that I should have been reporting these as investments for the last 9 years, and that I will probably need to pay a $10,000 penalty, per pension, per year.... totalling $180,000!

I am freaking out! Is anyone else reporting their UK company pensions to the IRS?

tHANKS

sir_eccles

Forget QROPS it doesn't work.

As for FBAR reporting, it depends on the type of pension scheme. The NHS one is probably a civil service final salary scheme, if so it doesn't need to be reported as far as I am aware.

alexgwoodruff

Thanks for that response. Do you recommend leaving them in the UK?

sir_eccles

In my opinion it would be foolish to do anything to an index linked final salary scheme other than to wait for your retirement.

alexgwoodruff

OK thanks, I appreciate you following up. In which case I need to research the best way to let the IRS know I have these pensions and try to avoid the fine.

Hotscot

Can you clarify...have you actually been drawing on these pensions? Are you currently of retiral age?
In any case I think the tax "expert" is scaring you too much, he's probably reading from the maximum possible consequences of undeclared foreign investments. Others can pipe in but in my opinion you have nothing to fear from these penalties.

theOAP

This is only my opinion, and should seriously be categorized as a comment from some stranger over the internet.

Do not let any "tax advisor" ramrod you immediately into any kind of 'voluntary disclosure programme' (this includes the 'Streamlined' version, but living in the US, you will not qualify for it). Talk to other advisors. Your LLoyds pension possibly should have been disclosed. As for the NHS, you need to investigate exactly what type of pension it is. There are other ways to come forward, and will likely result in far lower consequences. BUT, you need expert guidance on how to proceed from an advisor that has your best (but nonetheless compliant) interests in mind.

alexgwoodruff

Thanks, to clarify... I am not drawing these pensions, and will not for at least 20 years. To be honest I had forgotten I even had the LloydsTSB pension, moving house last year and going through some documents I came across a notification that the pension was worth $303 p.a back in 1999. That was what really prompted this entire quest. I figured that with 20 years left I could make the pension work better for me here than leaving it at home and paying to wire funds (as small as they would be) when I eventually start getting a monthly payout.

Pulaski

Agreed, ..... at least the "forget" bit, but regarding the rest of what you said, it's not so much that "it doesn't work", more that it isn't possible!

JAJ

The general consensus appears to be that:

- Employer defined benfit pensions don't need to be reported on FBAR, other kinds of pensions may need to be.
- Pensions do need to be reported on form 8938 however not everyone has to file this (depends on the amount of foreign assets) and it's not clear if the value of defined benefit pensions should be reported as anything other than zero
- Pensions do not usually generate taxable income until they are drawn down.
- Those who have not significantly underpaid U.S. tax should not be declaring into any kind of "voluntary disclosure program"
- The chance of any fines, etc, from not filling out an information report (when there is no tax underpaid) is miniscule. In such cases, it's usually acceptable to complete information reporting on a go-forward basis.

Also note that in general, you have a three year statute of limitation on your tax returns and as long as you signed your returns in good faith, you are not under any obligation to amend (even if you subsequently discover an error). There are times it may be advisable to amend, but as far as I know it is not an obligation if the original return was signed in good faith.

nun

It is impossible to give a meaningful answer to the OP's question without knowing exactly what sort of pensions we are talking about as defined benefits (final salary) pensions are treated differently from defined contribution plans like SIPPs. If you have can move the money between various equity and bond funds things could get tricky. If it's a final salary fund you'll be ok as FBAR does not apply and the treaty exemption on does not need to be explicitly claimed. Of course any income you take needs to be included on your 1040. the fact that you have an annual amount for the Lloyds pension sounds promising and the NHS is also probably a defined salary pension.......so please let us know what you have.

One certain thing is that you cannot move a UK pension to the US and QROPs for a US tax payer are meaningless and useless. The US and the UK does have a reasonable way to treat under the tax treaty so you would be a fool to move pension money from the UK in an effort to simplify US taxes.