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UK Pension Fund Managers Declining US Residents to Avoid FATCA

UK Pension Fund Managers Declining US Residents to Avoid FATCA

Old Nov 4th 2014, 10:31 am
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Default UK Pension Fund Managers Declining US Residents to Avoid FATCA

Hi all,

Both my wife and I moved here in 2012. We have UK SIPP pensions with Aviva, invested with a variety of fund managers- Blackrock, Invesco etc.

Aviva have told us that the fund managers are now refusing to allow US persons/ residents to invest in their funds to avoid FATCA and the potential US government raid on their funds. As a result, our pension assets with the fund managers will shortly be sold down into cash.

Aviva have no problem with us keeping our pensions with them. They have no reporting requirement. But the fund managers are refusing to allow our pensions to be invested with them, despite the HMRC/ IRS agreement which excludes pensions:

https://www.gov.uk/government/public...tion-agreement

I've researched QROPS via this site and see the consensus is to steer clear. I suspect that, unless they're US based, the QROPS pension providers would have the same problem with the fund managers anyway.

Does anyone have any suggestions?

Anyone have experience of transferring their UK pensions over to the US? I see that HMRC maintain a suitable list of QROPS in the US, including Fidelity Investments 401K Pension Plan etc.

https://www.gov.uk/government/public...-schemes-qrops

Thoughts?

I suspect this situation will become more common as FATCA bites...
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Old Nov 4th 2014, 6:02 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

Originally Posted by sjh520
Hi all,

Both my wife and I moved here in 2012. We have UK SIPP pensions with Aviva, invested with a variety of fund managers- Blackrock, Invesco etc.

Aviva have told us that the fund managers are now refusing to allow US persons/ residents to invest in their funds to avoid FATCA and the potential US government raid on their funds. As a result, our pension assets with the fund managers will shortly be sold down into cash.

Aviva have no problem with us keeping our pensions with them. They have no reporting requirement. But the fund managers are refusing to allow our pensions to be invested with them, despite the HMRC/ IRS agreement which excludes pensions:

https://www.gov.uk/government/public...tion-agreement

I've researched QROPS via this site and see the consensus is to steer clear. I suspect that, unless they're US based, the QROPS pension providers would have the same problem with the fund managers anyway.

Does anyone have any suggestions?

Anyone have experience of transferring their UK pensions over to the US? I see that HMRC maintain a suitable list of QROPS in the US, including Fidelity Investments 401K Pension Plan etc.

https://www.gov.uk/government/public...-schemes-qrops

Thoughts?

I suspect this situation will become more common as FATCA bites...

interesting info as my husband has a pension with Aviva, we haven't had any info like that. Will look out for it.
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Old Nov 4th 2014, 6:08 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

As I understand it they are starting with people who have confirmed their addresses in the US.

Not sure how far their going to delve as it appears the fund managers are leading this, not the pension providers.
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Old Nov 5th 2014, 3:10 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

It's not possible to transfer UK pensions to US retirement accounts. I would avoid a QROPS because of the expense and the possibility that the IRS will see the transfer as a taxable event. So look for a SIPP/funds that is ok with your US residency, although I thought the terms of FATCA were supposed to avoid stuff like this.

Last edited by nun; Nov 5th 2014 at 3:20 pm.
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Old Nov 5th 2014, 4:54 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

Thanks for taking the time to comment Nun.

I've been told by my UK financial adviser that other pension providers are taking the same view, but will make some more enquiries.

I'll post back here what I find out.
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Old Nov 5th 2014, 5:11 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

Thinking out loud and rather hypothetically.

Suppose there is no fund manager willing to take on expat USC pension or investment funds. Does this make the whole thing an "undue burden" and call into question the constitutionality of the law?
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Old Nov 5th 2014, 5:38 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

Originally Posted by sjh520
Thanks for taking the time to comment Nun.

I've been told by my UK financial adviser that other pension providers are taking the same view, but will make some more enquiries.

I'll post back here what I find out.
I'd get back to Aviva and point out that UK registered pension funds are exempt from FATCA.
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Old Nov 5th 2014, 5:52 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

Thanks Nun. Tried that already unfortunately. Sent Aviva the HMRC/ IRS agreement and referenced the specific clauses.

They said they can't help as Blackrock and others are point-blank refusing to allow US residents/ persons from investing from their funds, including "look through" (where a fund invests in other funds that invest in Blackrock).

This makes the agreement between HMRC/ IRS irrelevant. Pensions don't grow properly when just invested in cash.

Frustrating to say the least!

Has anyone successfully transferred a UK pension to the US and not been penalised in tax/ fees etc?
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Old Nov 5th 2014, 5:53 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

Originally Posted by sir_eccles
Thinking out loud and rather hypothetically.

Suppose there is no fund manager willing to take on expat USC pension or investment funds. Does this make the whole thing an "undue burden" and call into question the constitutionality of the law?
That's an interesting point. I know the Republicans talked about having it repealed, I suspect to garner some ex-pat votes before yesterday's election.
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Old Nov 5th 2014, 6:24 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

Originally Posted by sir_eccles
Thinking out loud and rather hypothetically.

Suppose there is no fund manager willing to take on expat USC pension or investment funds. Does this make the whole thing an "undue burden" and call into question the constitutionality of the law?
It depends on your particular view of US politics, but there is action on this. As has been mentioned, it's being promoted by Republicans Overseas.

"Mr. Bopp told The Times that he plans to attack the act on three legal grounds: that it violates the Senate’s sole possession of foreign treaty power, the Eighth Amendment’s ban on cruel or unusual punishment and the Fourth Amendment’s personal privacy guarantee."

http://www.washingtontimes.com/news/2014/may/5/superlawyer-jim-bopp-takes-on-mccain-backed-tax-ac/?page=all


The actual legal opinion document for the lawsuit:
https://abolishfatca.com/BoppFATCALegalOpinion.pdf

The organisation Democrats Abroad are promoting a different approach, the "same country exclusion". If you have an account in the UK and are resident in the UK, the account would not fall under FATCA legislation.
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Old Nov 5th 2014, 6:38 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

Originally Posted by theOAP
The organisation Democrats Abroad are promoting a different approach, the "same country exclusion". If you have an account in the UK and are resident in the UK, the account would not fall under FATCA legislation.
That almost sounds like a sensible suggestion, though I can see house prices in the Caymans rising a little.
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Old Nov 5th 2014, 6:40 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

Originally Posted by theOAP
It depends on your particular view of US politics, but there is action on this. As has been mentioned, it's being promoted by Republicans Overseas.

"Mr. Bopp told The Times that he plans to attack the act on three legal grounds: that it violates the Senate’s sole possession of foreign treaty power, the Eighth Amendment’s ban on cruel or unusual punishment and the Fourth Amendment’s personal privacy guarantee."

http://www.washingtontimes.com/news/2014/may/5/superlawyer-jim-bopp-takes-on-mccain-backed-tax-ac/?page=all


The actual legal opinion document for the lawsuit:
https://abolishfatca.com/BoppFATCALegalOpinion.pdf

The organisation Democrats Abroad are promoting a different approach, the "same country exclusion". If you have an account in the UK and are resident in the UK, the account would not fall under FATCA legislation.
Thanks. Best case scenario in the Washington Times article is to have the law repealed in 2017. That might be too long for many people, who are renouncing citizenship to avoid it:

'I was terrified we'd lose all our money': banks tell US customers they won't work with Americans | Money | The Guardian
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Old Nov 5th 2014, 6:51 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

Originally Posted by sir_eccles
That almost sounds like a sensible suggestion, though I can see house prices in the Caymans rising a little.
It would solve the problem for 90% of those affected but wouldn't solve the OPs problem, nor for those who, for example, live on the French/Swiss boarder with bank accounts for living expenses in France (cheaper/affordable housing) and separate bank accounts (deposit of pay cheque) when working in Geneva.

But it won't happen. The US Treasury, acting without legislative approval from Congress, created the IGAs to solve the problem of privacy issues. If they have that power, they could easily have instituted a same country exclusion in the IGAs; particularly since they have been aware of the large number of US expats with account closure problems, or problems similar to the OPs.
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Old Nov 5th 2014, 6:52 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

Originally Posted by sir_eccles
That almost sounds like a sensible suggestion, though I can see house prices in the Caymans rising a little.
But if they held accounts in any other country they would have to report to the US govt. This is a ridiculous piece of legislation which can only harm US interests both at home and abroad.
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Old Nov 5th 2014, 8:28 pm
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Default Re: UK Pension Fund Managers Declining US Residents to Avoid FATCA

I think the OP needs to get Aviva to offer some funds that are ok with a US citizen owning them inside a UK pension, or find another SIPP provider that can help them, and write a letter to their MP to explain the situation.

I would also ask the question over at UK-Yankee.com in the US/UK tax forum. If the common practice is to exclude all US persons from funds invested in UK pensions there are going to be a lot of people with the same problem.

Last edited by nun; Nov 5th 2014 at 8:31 pm.
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