Donibristle

I'm in a similar position, lived in the US nearly 20 years, dual citizen with a chunk of money in a UK pension. Had started looking into options to deal with it, heard about the whole UK/Malta thing, was contacted on LinkedIn by a New York based company (read above that they may be not entirely correct in their advice and interpretation?) and at this point have no idea what to do. No plans to return to the UK.

Seems an incredibly complicated situation!

nun

I thought RRSPs got automatic tax deferral now? and no need to file foreign trust forms...So the question would be why would a SIPP be a foreign trust if the money is self invested? On what basis does Frank Hirth think that a SIPP is a foreign trust? The tern "SIPP trustee" is used to describe the administrator, but is the SIPP trustee actually a trustee if they have no control over how the money is invested, or distributed?

The structure of the SIPP is key here and some professionals will advise foreign trust filling and some will say that it qualifies as a pension under the treaty....it's another grey area.

MidAtlantic

I go with SIPPs being a pension under the treaty:

Article 3 1 o
.. the term “pension scheme” means any plan, scheme, fund, trust or other
arrangement established in a Contracting State which is:
(i) generally exempt from income taxation in that State; and
(ii) operated principally to administer or provide pension or retirement
benefits or to earn income for the benefit of one or more such arrangements

nun

Yep, that's what I'd go with too. Obviously if you don't elect the treaty for FTC reasons the trust filing might be necessary.

Neillc37

It's more complicated than this. When I delt with the IRS on my pensions they wanted to know if they were work related. So if you could pay into a plan absent work they won't consider it protected. This gets you to the point that supposedly SIPP has a problem if you make certain kinds of contributions to it (presumably non-work related) and end up stripping it of it's protection.
At this point the least of your problems would likely be 3520 as you would meet 8621 to handle the evil sec 1291 or PFIC taxation.

nun

The treaty makes no disrinction between a work related or not pension, it just has to be recognized as being for retirement so an ISA would not be a pension. Obviously the IRS can interpret the treaty in a number if ways and without a ruling on this it's left up to the individual to navigate the rules and explain their stance to the IRS. Some professional advisors would file as if the SIPP is a pension under the treaty and if the IRS questions that stance then try to argue the point.

A SIPP is very similar to an IRA and maybe by using that analogy the IRS would get it.

nun

......you could also argue that a SIPP is work related, even if by definition is is not offered by an employer, as you can only contribute earned income.

freddie_freeloader

Apologies I have been swamped the last couple of days and just checked in to find all of these helpful replies. I am going to ponder this for a day or so and then will likely be back asking some additional follow up questions.

But to clarify - i have not contributed to the UK pension since I left. All funds in there relate to the period I was in the UK. In fact one of the pensions was an opted out state second pension where I withdrew from govt scheme.

It does all sound very complicated and I would want to avoid any stress from the IRS. Having said this I really do want more choice and more control than the providers range of funds (about 20 or so).

Thanks you all for taking the time to respond. Extremely helpful.

Regards

Arb

nun

FYI, here is an IRS letter that clearly states the situation when a transfer from a UK pension plan to a SIPP would not be a taxable event. I seems to me that if you can transfer a UK employer pension plan to a SIPP free of any UK tax because of the status of both schemes in the UK as pensions, then they are also both pensions under the treaty and the transfer would also be US tax free. A ruling would be nice.

https://www.irs.gov/pub/irs-wd/10-0151.pdf

kodokan

Are there a couple of funds you like, or even one? One way to simplify it would be to think of your UK pension plans as part of your overall retirement planning portfolio, and pick different asset options across your possible plans - you don't need replication all over.

For example, my UK plans are invested in mostly non-US funds, so I consider those as part of my International asset allocation. Here in the US, we have two 401ks from a previous and current job. The current one has excellent equity fund choices including Vanguard offerings at 0.02% annual fees, but the only REIT offering in madly priced at 1.5% and I don't like the underlying investments in it much. So I use the current 401k for equities and a bond fund for rebalancing, and the old 401k purely for a REIT/ bond combo as they have a far better REIT option but the equity offerings are sub-par.

If you consider your UK plans like this, you may find leaving it alone becomes much more palatable.

Pulaski

Not complicated. Exactly as if you were in the UK, you leave it until you reach retirement age, then you have a few options as to how you turn it into an income stream.

I recommend that, if contacted again by unsolicited sharks, that you tell them "if they contact you again you will report them to their compliance officer". .... People in financial services hate that. If they are reported to their compliance officer it triggers a formal investigation, which has to be shown to the regulators when they visit.

If you need to contact a compliance officer, just address a letter to the Compliance officer at their local (US), or head office, stating that you previously told them not to contact you, and they have done so.

Hotscot

Thanks for that tip. I shall use it.
I've gotten the Malta thing a couple of times.
They trawl LinkedIn to target likely prospects.
I usually tell these idiots from ******'s that I know more than they do and that my finances are none of their goddamn business.

(That's funny, the company name has blanked out, just back one day and I'm already breaking rules?)

Pulaski

Their lawyers got heavy with BE, so the forum software blanks out their name, even in PM's. I am sure there are permutations of çhâř@ćţëৠthat could get through the blocker, but I wouldn't want them to harass BE because of one derogatory honest post.

Hotscot

Really?
<<<SNIP>>> lawyers?

Pulaski

Never heard of them.