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Specialist advisors of UK pension transfer to USA

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Can I Transfer my UK Pension to my US 401k?

Can I transfer my UK pension to the US?

There are roughly one million British expats who are now resident in the US, there are also many hundreds of thousands of US citizens who have worked in the UK and are entitled to UK Pension benefits.

If you are planning to retire in the USA then you may want to transfer your UK Pension to the USA into a 401K or IRA in the US.

Transfer your UK pension to the US

It is possible to transfer your UK pension into a US retirement plan, but only in very limited set of conditions. Under current USA legislation, you won’t be able to transfer your UK pension to a 401k.

When you or your employer contribute to a UK Pension scheme, you receive tax relief on that contribution, occasionally up to 45%. Getting some tax relief on your UK pension contributions means that some of your money that would have gone to the UK government as tax, instead will go into your pension fund. This is similar to the tax deductible contributions in the US.

The government will get some of this revenue back when you withdrawal your pension, as UK pension income is taxable. The UK government dislike this probable tax revenue leaving the UK. However, there are ways to transfer your UK Pension to the US without incurring tax charges, one of those options is to transfer your UK pension to a Qualifying Recognised Overseas Pension Scheme (QROPS).

Transfer your UK Pension to the USA vis a QROPS

A Qualifying Recognised Overseas Pension Scheme (QROPS) is an overseas pension scheme that HM Revenue & Customs recognises as eligible to receive UK transfers from registered pension schemes in the UK. To qualify as a QROPS, the scheme must meet a number of requirements set by HMRC.

The QROPS was suggested to allow individuals who had worked in the UK, the ability to transfer their UK pension to their new country of residence. However, the government soon realised that QROPS were not being used for their intended purpose, and many people were transferring to QROPS in countries where the individual didn’t reside to simply to try to avoid UK taxes. This is one of the reasons why the Overseas Transfer Charge was introduced.

Overseas transfer charge

From 9th March 2017, transfers to QROPS attract a 25% tax charge but with a few exceptions. You may be initially exempt from the charge on transfer, but you will have to pay the 25% tax charge if your circumstances change within 5 years, in circumstances such as you or your QROPS moving to another country.

There are currently just two pension schemes in the US that have QROPS status (as of April 2020). These are both Simplified Employer Pensions so you would need to be an employee of either Supply Chain RFID Consulting LLC or Transform Group.

If you try to transfer your UK pension to a US pension scheme that doesn’t have QROPS status, then this would attract a UK tax charge of 55% which is payable by you and the pension scheme and therefore most UK providers will block the transfer.

However, there is a solution, you can transfer your UK Pension to an International SIPP

Transfer your UK pension to an International SIPP

An International SIPP is ideal if you are a UK Expat and non-UK resident. You can invest your pension in a wide range of investments including ETFs, Mutual Funds, Shares, Bonds and Investment Trusts and they can be held in multiple currencies such as US Dollars, so you don’t need to be concerned with currency fluctuations.

A SIPP offers complete flexibility over withdrawals from age 55 and we can even pay your pension directly into your US bank account.

If you have a more than one UK pension, you can consolidating them into one SIPP. That way you can reduce the fees you’re paying and keep administration to a minimum.

If you live in the USA we can give advice by phone, email or Skype.

Contact us today for more information.

Schedule a free (no obligation) 30 minute consultation call at a time that suits you.

Book a FREE Consultation