UK Pensions are a problem for a US resident, but there is a solution. QROPS
PRLog - Nov. 21, 2013 - FORT LAUDERDALE, Fla. -- If you are living in the US but have a British pension, you may have forgotten about, you need to take action now.
The IRS do not recognise UK pensions, as pensions, so require these to be reported under the new FATCA legislation. Failure to report, will result in a $10,000 fine up to a maximum of $50,000.
Also the treatment of UK pensions under the UK/USA DTA (Double Taxation Agreement) is not good. The UK Government tax interest on your fund growth before you get it, and the IRS tax the interest on your fund growth once it is credited. The IRS also tax any Cash Lump Sum (Normally tax free in the UK) if you are a US Citizen, resident in the US. If you could move your UK pension to the US, you would be so much better off. Problem is you cannot move a UK pension to the States.
However, since 2006 there has been an alternative. Under an EU directive the UK government was forced to let people take their pensions out of the UK. A Qualifying Recognised Overseas Pension Scheme, or QROPS as it is known. Allows you to transfer your pension out of the UK.
A QROPS transfer can provide the following benefits for a USA resident:
• No UK income Tax liability on pension income. UK pensions are taxed at source. QROPS is not subject to UK tax.
• QROPS allows your assets to be structured in USD, with income paid in USD. This can be paid to a USA bank account, in USD.
• A QROPS can hold cash and investments in more than one currency. When in the USA take income as dollars. When in Europe take income in Euro, and if in the UK take income as GBP. Your UK pension arrangements can only pay out in GBP. This leaves you open to currency rate fluctuations outside of your control. QROPS allows you to take control back.
• No need to buy an annuity or ASP (Alternatively Secured Pension) at age 75. This affords you greater control. Your existing UK provision may lead you to take a low rate of return. For example, once a fixed annuity of 3.5%pa is purchased by your UK scheme that would then be your return for life. Your QROPS pension could pay you an income of 10%pa. It also allows your fund to continue growing whilst you take an income. Which can then provide a higher pension income in later years. This is an important factor to hedge against the effect of price inflation on your pension income.
• No Tax liability on your pension fund assets as they continue to grow. Assets in your UK pension fund are subject to Tax, both in the UK and in the USA. Once transferred you’re fund is not subject to Tax, and continues to grow Tax free.
• A far wider range of investments, ranging from cash, unit trusts, shares, commodities, gold, ETF’s, commercial property (including overseas property) and much more.
• Fully portable from country to country.
• You are able to leave the remainder of your pension fund to your heirs on your death. As most people will choose a single Annuity, once in receipt; your UK pension has no value that can be passed to your partner or children. Whereas your QROPS pension can be left to whoever you wish.
• If not vested in an Annuity on your death your pension fund is subject to a 55% tax charge in the UK. A QROPS would pass the total value to your beneficiaries and is not subject to this tax charge.
• A QROPS allows access to benefits from age 55 if you have been outside the UK for 5 tax years or more.
• A QROPS allows access to 30% Cash Lump Sum from age 55 if you have been outside the UK for 5 tax years or more. This is 5% more than allowed under UK pension legislation.
• Pension rights transferred into a HMRC Approved QROPS are protected from UK inheritance tax.
Moving your UK pension arrangements to a QROPS if suitable given your own particular circumstances, can only improve your position.
Most importantly, once moved to a QROPS you have control over your money. If left in your UK pension arrangements it is highly likely that additional constraints will be put in place which will adversely affect you.
If you have a UK pension and have left the UK, or are considering a QROPS transfer, contact Waterstone Investment Associates.
For further details contact: mailto:information@qropsusa.net
or visit their website: http://www.waterstone-investment-associates.com
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UK pension but living in the USA? BIG PROBLEM!
November 21, 2013 at 14:37 PM EST
