US Tax Advice on British Pension Transfers
We are not tax advisors but we do understand taxation of pension funds in the UK. This page is not designed to give you personal US Tax Advice on British Pension Transfers but is designed to provide information that will help people understand the type of US Tax Advice on British Pension Transfers they should be seeking.
Assuming you are 55 or older then the Double Tax Treaty (DTT) between the US and the UK allows for individuals to obtain their Pension Commencement Lump Sum (PCLS) without any federal tax being applied. Individuals need to check in the State they live in if there are any local state taxes which will apply, and talk to your local advisors regarding US Tax Advice on British Pension Transfers.
The Double Tax Treaty (DTT) between the US and the UK allows for individuals to obtain their income without UK taxation applied. This means the income from the UK pension fund is treated purely under US taxation both at federal and local state level. You must be 55 or older to access your income from a UK pension. Talk to your local advisors regarding US Tax Advice on British Pension Transfers.
No, you do not avoid taxes! Taxes will be due in the USA exactly as before.
Some companies claim that additional tax is saved from utilizing a QROPS over a UK pension, but fail to point out that, in most cases, HIGHER potential taxes will apply within a QROPS and there are potential penalties. The exception maybe those with funds in excess of £1,000,000 that may be hit by the Lifetime Allowance or those people with US pension tax credits; contact a UK registered adviser to understand the Lifetime Allowance and its tax implications and a US tax advisor to understand US pension tax credits.
Taxation within a UK pension, and access to the pension both in terms of Pension Commencement Lump Sum (PCLS) and income is dealt with via the interaction between UK pensions, tax for non-UK residents and the Double Taxation Agreement (DTA) that exists between the UK and the USA.
No, in most cases no additional tax is saved, and in some cases HIGHER taxes will apply than leaving it in the UK. You must always declare your funds, and PCLS and any income in the US. How they are then treated will depend on the IRS position on UK pension funds and Maltese trusts. The only exception with regard to savings of UK tax would be those clients with funds in excess of £1,000,000 that may be hit by the Lifetime Allowance and who also have US pension tax credits; contact a UK registered adviser to understand the Lifetime Allowance and its tax implications and a US tax advisor to understand US pension tax credits.
In essence it will come down the Double Tax Agreement between where your pension is based (the UK or Malta) and the way in which local taxes apply where and when you retire. This last part is critical, it is where you retire that counts, not where you currently live and not purely where your pension resides!
The answer for a SIPP is simple – No, if you have correctly declared your pension funds. For a QROPS, this has yet to be tested with an IRS decision. Some US tax advisors believe that a QROPS or QNUPS would be treated as a trust in the USA and therefore only IRS recognized funds should be utilized within the portfolio and taxes may be due. Talk to your local advisors regarding US Tax Advice on British Pension Transfers.
You cannot move your UK pension to a US pension. It would not be acceptable under US rules.
A SIPP is a UK pension, so it is tax neutral. However, there may be considerable other advantages of utilizing a SIPP other than tax reasons. See other pages of information on SIPP on this website.
Aisa International is not licensed to give tax advice on pension transfer matters – nothing on this page or website should be construed as personal tax advice in the US but only as guidance on the questions you should be seeking answers to.