Few financial considerations are as important to the British expat in the United States as the management of their existing international pensions. First and foremost, expats should remember that a UK pension cannot be transferred to a US scheme; neither a 401k nor an IRA retirement plan will accept payments from a UK pension scheme.
However, British expats in the US do have options when considering how to manage their international pensions, particularly if they are classed as a Non-Resident Alien (NRA).
Subject to obtaining tax advice, the following financial arrangements may be available to our NRA clients:
- International Pension Plans (IPPs)—both Regular Contributions and Single Contribution. “Toxic” assets held in PFICs can be transferred into an IPP, removing them from the additional “Toxic” tax charges and allowing tax-free growth.
- Bespoke US Self-Invested Personal Pension (SIPP)—when NRAs have deferred pension benefits in the UK.
- Management of existing QROPS pensions
QROPS in the United States
It is important to bear in mind that although QROPS have been available to US residents previously, since March 2017 the UK Government has imposed a 25% charges on QROPS transfers for people residing outside the European Economic Area (EEA). Note, this is not retrospective to transfers completed prior to this date.
SIPPs in the United States
In May 2010 the IRS released a document which has continued to be beneficial for clients who are considering a SIPP as the solution to the management of their existing international pension.
If an employer pension scheme in the United Kingdom and a SIPP are both pension schemes within the meaning of Article 3(1)(o), then a transfer of income earned by the employer pension scheme to the SIPP would not be a taxable event in the United States.
Furthermore the Double Taxation Agreement that exists between the UK and US makes it clear that a SIPP is allowable and should not attract tax. This, however, does not mean that a SIPP is a solution for all US residents; larger pension funds may exceed the lifetime allowance and can attract additional tax obligations.
The best thing for savers and pensioners alike is to take trusted cross-border tax planning and wealth management advice that is specific to their circumstances.
Contact Blacktower Today
Blacktower Financial Management exists to help you achieve your financial goals. Whether you want help with cross-border tax planning, management of existing international pensions or some other aspect of wealth management as an expat in the US, we can help you protect, preserve and grow your wealth.
Contact Blacktower today for professional and attention to detail with a very British approach.
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