hitenr

Hello,

My wife has received a great quotation on transferring her final salary pension to a defined contribution plan.

The company that approached us about looking into doing this isn't regulated and is quoting a high charge so we are probably not going to go with them.

So we are planning on who to use; what to do etc.

We need to decide:
1. Which financial advisor to use - any recommendations welcome! Most appear to charge a % of the pot to transfer; would be great to get someone charging a (low) flat fee
2. Whether we keep the pension in the UK or overseas (in a QROPS - Qualified Recognized Overseas Pension Scheme).

Has anyone here looked into any of this before?

Thank you in advance friends!

Owen778

Your best bet is to do a search on the USA forum here for QROPS. It's been too long for me to remember the details, but the usual advice is to never transfer. It makes plenty of money for the company doing the transfer, but is always a bad idea.

hitenr

Thanks - yes it does look like QROPS might not be the best way forwards. But to take the final salary pension transfer value (which is now 53x the annual amount!) and convert to a money purchase scheme seems like a sensible move. Wondering whether anyone has done this before and if so whom with?

Pulaski

This!

There are no QROPS in the US for UK pension savings, and not many outside the US that are acceptable under US securities laws and IRS regulations. That said, in fact there are few if any pension regulatory regimes around the world where your pension is better protected than in the UK, and IMO it would be an act of sheer folly to voluntarily* remove your pension nest egg from the pension fortress in the UK and move it elsewhere.

Also, be aware, there are some pension "advisor" sharks out there, spreading misinformation and fear, about punitive taxes in the US on pension funds held in the UK. That, to be polite, is nonsense, and to be blunt is utter 8011o¢k$.
If you're still in the UK, or can persuade an adviser in the UK to talk with you (your wife) then I would do so there, in the UK.

Also, take care that taking the buy-out doesn't trigger a tax charge in the US if you are already subject ton US income taxes.

* There are some countries (maybe Australia and NZ?) where there are punitive taxes if you leave your pension in the UK (outside the country you immigrated to).

hitenr

Agreed - yes as per above, still would like to keep in US but switch from final salary to money purchase given the high multiple I'm getting...

Glasgow Girl

Although it is usually the case that you should stick with a final salary pension, a transfer value of 53x the annual amount does change that advice, and you will likely be significantly better off transferring out. With that said and assuming you live in the USA now and for the foreseeable future then probably your only realistic option is to transfer to a UK based SIPP. Assuming the transfer value is more than 30,000 GBP you are required to take documented financial advice from a certified UK IFA. That alone will run about 2,000 GBP regardless of the size of your transfer value, more if it is a very large pot. The cost of the advice is high but is largely related to the insurance they have to pay to issue that advice not the time required to do so. The output will be a report that will clearly indicate the pros and cons of transferring. Then assuming you want to go ahead, you have to pay commission to the IFA on the transfer itself, probably in the 3% range. There is no getting around that. You must use a UK certified IFA and almost all of them will have nothing to do with anyone who lives in the USA, the reason being that they have to carry insurance to be an approved advisor and no insurer will let them deal with anyone based in the USA because of the risk of being sued in the US courts for giving bad advice. Therefore you need a specialized service. There are quite a few scam artists out there that will “manage” this on your behalf, and the few that are legitimate are not cheap as stated previously.

Transferring to a SIPP comes with pros and cons that you will have to research for yourself. But in short you can either manage the investments yourself or let the IFA manage them for you for a fee of about 1% a year (on top of the fund managers fees). You will also have to decide for yourself whether you want to declare it as a trust on your tax return. Some people are adamant that you have to do this but just as many state that you do not and you can just declare on your FBAR and tax return as a normal foreign investment but either way you have to declare it and any income taken or you will get into real trouble. Both are doable you just need to put some time aside to learn how to do it (or pay for yet more expensive advice). With a SIPP you can drawdown the money as you want to and there may be significant tax advantages to the timing of your withdrawals versus the regular payment that the final salary scheme requires.

I was in the same position as you with an excellent transfer value that made the decision a no brainer. I am currently in the process of transferring a final salary scheme to a SIPP. It should be completed in about 5 or 6 weeks. I researched the heck out of the advisors and followed up references etc. The cash transfers from the final salary scheme directly to a UK authorized and regulated SIPP so the advisor never gets to handle the money itself which is an excellent safeguard. If all goes well I will be happy to PM you and share the details of the advisors I used but I do not want to do so until everything has been completed successfully.

hitenr

Excellent ty - this is really incredibly great info!! Just what I was looking for...

Wirksworth

Hi,
I went through the transfer out decision process a couple of times but made the decision to do this for several reasons:
I had moved to the USA and got Married
My DB pension was with a previously very strong company but one now on much harder times ( even before Covid) and the value of my pension meant that the UK pension protection scheme would be of limited value
The revised Cash transfer value was much improved - +20% difference in 2 years
DB pension payments would be in £ and now all my expenses are in $ - Using a SIPP I can invest more of my fund into $ based assets ( assuming the £ recovers some time) thereby giving me better currency risk management .
The inheritance benefits of a SIPP are better than for a DB particularly if you die before taking any DB benefits.
I already had a UK SIPP - although this was with HL and they will not take a transfer in if you are a USA resident as they require a positive recommendation to transfer in (see below) also there advisors will not do the transfer review due to liability issues and insurance for USA residents .

I used a small UK advisor firm who would give the required advice certificate but would not provide a positive recommendation again due to insurance issues. As I previously had had a comprehensive IFA review recommending transfer when the cash value was lower I was fine with this. I paid the IFA £1500 only. My DB provider only wanted the advice certificate as did AJBell who I moved to. They are not as slick from an admin and platform perspective but their platform does the job,

I found there were USA based firms who would offer the required advice but at a much higher cost plus they really want to have you manage your money. In general, as others have said there are plenty of sharks circling in this space.

I too took advice re Grantor Trust reporting of one's SIPP - 50% said you should report including one of the big Four UK firms and 50% said you do not need to. I took the cautious approach and have just reported for the first time. The forms are not easy to decipher but having seen them filled in I could do these going forward. As others have again said the FBAR etc is required the grey area being the Grantor Trust forms.

Another grey area is the 25% Tax free Lump sum with advisors split 50-50 as to if it is taxable in the USA . I have read though that someone on this forum who had paid US tax on the lump sum successfully got a refund.

Finally for those in the Lifetime allowance cap area there is one firm saying that the Life Time allowance Tax is allowable as an offset against other USA tax liabilities- I haven't looked in to this in detail and I am sure they charge chinky amounts for their advice.

I recall reading that there is a stop on DB pensions doing transfers out at the moment due to the uncertainty but as I had done mine I haven't followed this in any detail

Good luck !

hitenr

Thank you!

freerskier

Great advice from your in progress real life situation Glasgow Girl - I was looking for something else in the forum and noticed this thread and your detailed response. Very pertinent to my situation so bookmarked for the future. Cheers.

ProfYaffel

Hi

Would you mind letting me know who you used for the financial advice ? I'm looking at transferring my pension and my pension holder requires the financial advice before the transfer process

Glasgow Girl

PM me, I don’t want to make details public without getting his permission first.

paul45

There are a number of factors in the decision of whether to stick with a final salary pension -
1- Rate of return embedded in the lump sum versus final salary (time value of money calculation, looking at various time ranges from receipt of benefits to death)
2- Quality of the company backing the scheme (you are effectively an unsecured creditor)
3- Lifestyle, spending, other sources of income in retirement - the final salary is not adjusted for inflation every year but your expenses certainly will be

So it's not so simple to say "you should stick with a final salary pension" OR "value of 53x the annual amount does change that advice." In my view, neither is correct and it requires deeper analysis to make a recommendation.

Next, "your only realistic option is to transfer to a UK based SIPP" is also not correct. There are international SIPP providers which work with IFA/RIAs that can provide access to US-based (if that's your preference) investments.

SquirrelRat

I thought company pensions were adjusted for inflation. Mine, from a university, certainly goes up every April.

ProfYaffel

Mine is too, with an oil company