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-   -   UK Final salary pension transfer (https://britishexpats.com/forum/usa-57/uk-final-salary-pension-transfer-932342/)

Glasgow Girl Jul 23rd 2020 1:04 am

Re: UK Final salary pension transfer
 

Originally Posted by paul45 (Post 12885880)
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.

Of course every situation has its own specific details but as rule of thumb you should stick with a final salary scheme unless you are offered a very high multiple of your annual earnings and are comfortable making major financial decisions independently. Anyone in the latter category will be well aware of that and will be more than capable of figuring out their own specific circumstances. Anyone in the former category is almost certainly going to be advised not to transfer. Nearly 80% of all analysis performed under the new regulations result in a No Transfer recommendation. Take into account that many people undergoing the required analysis fit into the latter category and that tells you that most people in the former category will get the No Transfer recommendation. Although there will be a few exceptions to the rule, this can help folks think twice before undertaking a very expensive analysis.

The UK based SIPPS provide access to funds in almost every major exchange and currency. In fact as an expat you are limited to specific international funds but retain the UK regulator protection which is priceless. Of course you could transfer to a non UK regulated SIPP but I would think more than twice about that one.

durham_lad Jul 23rd 2020 12:24 pm

Re: UK Final salary pension transfer
 

Originally Posted by SquirrelRat (Post 12885916)
I thought company pensions were adjusted for inflation. Mine, from a university, certainly goes up every April.


Originally Posted by ProfYaffel (Post 12885918)
Mine is too, with an oil company

I have 2 UK private pensions and one US private pension. One of my UK private pensions is adjusted for inflation the other 2 pensions are fixed. The US pension is over 4 times larger than the other 2 combined and it is fixed, and has been since I retired over 10 years ago. Fortunately inflation has been low this last 10 years and we are now both coming up to OAP and SS age.

paul45 Jul 23rd 2020 11:24 pm


Originally Posted by ProfYaffel (Post 12885918)
Mine is too, with an oil company

I should rephrase "the final salary is not always adjusted for inflation". That said, what matters is your lifestyle and spending. If inflation is 2% per year but your spending is increasing by a greater amount (think healthcare costs in the US), even if just a portion, this could present a challenge.


Originally Posted by Glasgow Girl (Post 12885958)
Of course every situation has its own specific details but as rule of thumb you should stick with a final salary scheme unless you are offered a very high multiple of your annual earnings and are comfortable making major financial decisions independently. Anyone in the latter category will be well aware of that and will be more than capable of figuring out their own specific circumstances. Anyone in the former category is almost certainly going to be advised not to transfer. Nearly 80% of all analysis performed under the new regulations result in a No Transfer recommendation. Take into account that many people undergoing the required analysis fit into the latter category and that tells you that most people in the former category will get the No Transfer recommendation. Although there will be a few exceptions to the rule, this can help folks think twice before undertaking a very expensive analysis.

The UK based SIPPS provide access to funds in almost every major exchange and currency. In fact as an expat you are limited to specific international funds but retain the UK regulator protection which is priceless. Of course you could transfer to a non UK regulated SIPP but I would think more than twice about that one.

All the factors I described are calculable, not subjective - it's a time value of money calculation incorporating income (whether from final salary or investing a lump sum with investment return assumption), expenditure and inflation expectations on various components of expenditure. You could also discount the final salary to some extent to account for credit quality of the pension provider. You compare the two cashflow streams and whichever comes out higher should be the direction you go.

ProfYaffel Jul 24th 2020 5:41 pm

Re: UK Final salary pension transfer
 
Hi
I need to take documented financial advice from a certified UK IFA before I can think about transferring my DB pension into a SIPP. Anyone have recommendations ?
P.S I dont have enought posts to be able to read PMs

Thank you

SquirrelRat Jul 24th 2020 9:23 pm

Re: UK Final salary pension transfer
 

Originally Posted by durham_lad (Post 12886131)
I have 2 UK private pensions and one US private pension. One of my UK private pensions is adjusted for inflation the other 2 pensions are fixed. The US pension is over 4 times larger than the other 2 combined and it is fixed, and has been since I retired over 10 years ago. Fortunately inflation has been low this last 10 years and we are now both coming up to OAP and SS age.

I think the inflationary increases are more likely with UK public sector pensions than private company pensions.
Lack of these pay rises can be problematic. Just ask any Brit living in Canada for the last 10 years watching their old age pension from the UK government dwindle. Fortunately I don't think it applies for US-based pensioners. There was a campaign to get the anomaly corrected. Although I think it is based on bilateral agreements between the UK and the other countries.

Otto The Squid Aug 26th 2020 11:46 am

Re: UK Final salary pension transfer
 

Originally Posted by paul45 (Post 12885880)
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.

You are aware that so-called International SIPPs are actually UK registered pensions.By definition, they are UK based.

Clarets Sep 14th 2020 9:03 pm

Re: UK Final salary pension transfer
 
Great info in this thread.
I am in the process of transferring 2 final salary pensions to a UK SIPP that will accept the transfer from myself as a US resident.
Has anyone found an adviser based in the UK that can handle this?

dvalentine Sep 14th 2020 11:38 pm

Re: UK Final salary pension transfer
 
I ultimately decided to keep my pension (I'm just too nervous about the future of the markets so like the idea of a guarantee), but I used Taylor & Taylor to go through the pensions review process and I felt very comfortable with them. They are US based but have Brits who keep certified in the UK so they may be able to help.

Otto The Squid Oct 6th 2020 4:31 am

Re: UK Final salary pension transfer
 
I saw the text of that deleted post.

A fundamental lack of understanding of the pension trsnsfer rules and misleading.

California1967 Feb 1st 2021 2:12 pm

Re: UK Final salary pension transfer
 
UK born and bred but USA resident since 1999. I opened an AJ Bell SIPP Feb 2020 and transferred in a defined contribution scheme. Transfer was easy, quick, took about 5 days start to finish.
In June I requested a CETV for my Defined Benefit which I received on October 1st.
I used an IFA found through a recommendation but checked his company out on vouched for UK. I paid a fixed IFA fee for advice of 2000 pounds. Others have quoted 1500 but i was happy with the fee.
I got other quotes which varied from 10k-18k based on a % of the CETV. So shop around
Within a month I had the transfer review completed. November 1
(My primary goal was estate management motivated by COVID. If I died early due to COVID or anything else before my DB pension was in payment my benefit amounted to a refund of contributions to my estate)
Finally after slow progress between the administrators and AJ Bell the pension was transferred in January.

Easiest part Opening the AJ Bell SIPP
Slowest part Waiting for the CETV to be issued due to "COVID speed"
Most comprehensive part, The IFA review which did recommend transfer based on my criteria.

I have been following the forum for years reading about ROPS/QROPS/Malta options but the fees were high and ongoing fees always seemed vague.
The new UK SIPP and paying for IFA advice is more transparent
Just sharing for everyones benefit

MidAtlantic Feb 1st 2021 3:14 pm

Re: UK Final salary pension transfer
 

Originally Posted by California1967 (Post 12966842)
UK born and bred but USA resident since 1999. I opened an AJ Bell SIPP Feb 2020 and transferred in a defined contribution scheme. Transfer was easy, quick, took about 5 days start to finish.
In June I requested a CETV for my Defined Benefit which I received on October 1st.
I used an IFA found through a recommendation but checked his company out on vouched for UK. I paid a fixed IFA fee for advice of 2000 pounds. Others have quoted 1500 but i was happy with the fee.
I got other quotes which varied from 10k-18k based on a % of the CETV. So shop around
Within a month I had the transfer review completed. November 1
(My primary goal was estate management motivated by COVID. If I died early due to COVID or anything else before my DB pension was in payment my benefit amounted to a refund of contributions to my estate)
Finally after slow progress between the administrators and AJ Bell the pension was transferred in January.

Easiest part Opening the AJ Bell SIPP
Slowest part Waiting for the CETV to be issued due to "COVID speed"
Most comprehensive part, The IFA review which did recommend transfer based on my criteria.

I have been following the forum for years reading about ROPS/QROPS/Malta options but the fees were high and ongoing fees always seemed vague.
The new UK SIPP and paying for IFA advice is more transparent
Just sharing for everyones benefit

Interesting to hear your experience. As a UK/US dual resident I transferred a Hargreaves Lansdown SIPP and two defined contribution personal pensions to AJ Bell a few years ago. My motivation was to consolidate them and reduce fees. My experience of AJ Bell has been excellent.

California1967 Feb 1st 2021 3:41 pm

Re: UK Final salary pension transfer
 
AJ Bell. I found them easy to deal with and telephone answering is prompt. On the platform I have been able to invest in a range of international funds operated by Fidelity and others as well as AJ Bell.

California1967 Feb 1st 2021 8:29 pm

Re: UK Final salary pension transfer
 
The adviser I used was Gary Day from AXG asset management. I didn't put his name up until he replied to my email confirming that was OK. You can check him out on vouched for. I have no personal relationship with this person but it took me a while to track an IFA down so just paying it forward.

reltub Feb 11th 2021 6:13 pm

Re: UK Final salary pension transfer
 
What is the tax position here in the US for a transfer of a defined contribution scheme into a SIPP (and left in the UK) ? I see that both California1967 and Mid Atlantic have undertaken this so perhaps you know the situation? Is tax payable at the time of the transfer or only down the line if money is transferred to the US?

Glasgow Girl Feb 11th 2021 7:32 pm

Re: UK Final salary pension transfer
 
Tax is due when withdrawn from the SIPP, not upon transfer to a SIPP. It is due upon withdrawal regardless of whether you then transfer the funds to the US. You should continue to declare on FBARs. Some say you also should declare It as a foreign trust, some say you don’t have to do that. I, personally do not declare my SIPP as a foreign trust but do declare it on Form 8938 because it is a lot simpler and there is no definitive guidance on the foreign trust requirement.


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