UK SIPP for a US citizen
Are you a US citizen with UK Pensions? Do you still have access? Are you wanting to consolidate many pensions into one? Do you simply want the ability to manage your investments? As a US resident or a US citizen you are unfortunately limited in which pension providers you can utilise.
Due to our US licensing under the SEC we can advise all US based clients on all of their needs. This is unlike most expat advisers and product providers who cannot due to the additional reporting requirements by the IRS. This does not mean however that you should settle for the first product provider that does. Within this article, we assess the key factors in utilising a SIPP for a United States citizen. We will cover the benefits and main points to consider.
UK SIPP for a US citizen
A SIPP is a self-invested personal pension plan. It will allow you to consolidate numerous pensions into one pot and invest inline with your requirements. An international SIPP is quite simply a UK SIPP that has been created for those who no longer in the United Kingdom. Thus offering the same perks such as flexible access from age 55 whilst continuing to be regulated by the FCA and as such offering you the best protection for your investments. The issue US citizens have is that the majority of financial institutions will not accept them as clients due to the additional reporting required by the IRS.
UK SIPP Options for a US Citizen
As per the above the SIPP providers for US citizens are more limited however the offering is still strong. Key factors to consider when choosing the right SIPP provider are:
A comparison of the existing international SIPP’s on the market can be found here.
Investment opportunities within a SIPP
The SIPP is the tax wrapper for your pension scheme, we still, however, require the product/vehicle that will allow us to invest your monies into the markets.
The key benefits/function of the platform are:
- Multi-currency – ability to hold cash in all major currencies including GBP, USD and Euro.
- Extensive fund range – unlimited funds (subject to the UK or European regulation) in all major currencies
- Ongoing management of pension fund via a regulated financial adviser
- Low cost
- Regulated – FCA regulation
- 24 / 7 access via online login
- Ability to implement the best strategy for your investments to meet your retirement plans
Next Steps – UK SIPP Options for a US Citizen
The first step if you are considering transferring to an International SIPP should be to speak to a professional, regulated adviser. They can find out your requirements in greater detail and advise on the best solution accordingly.
What does a pension transfer cost? For a full breakdown including case study please see an article I have written here
Can I take 25% tax free lump sum from age 55? Yes, you can however this is only tax free in the UK with income tax being due in the US. The amount can vary from state to state and I would therefore strongly recommend taking tax advice from a local regulated expert
Can I withdraw the full amount in one go? Yes, you can however depending on the value of your pension you are likely to incur a considerable tax liability. It is often therefore preferable to withdraw the monies over a number of years to reduce the tax payable.
Can I take my pension as income? Yes, you can. Via flexible access drawdown, you can take pension payments as you wish whether regular monthly payments, quarterly or bi-annually.
Isn’t there a Double taxation agreement between the US and UK and what does this mean for me? There is a DTA between the UK and US and as such you can avoid paying double tax by applying for an NT code. This would then be provided to the SIPP provider and in turn, all withdrawals will be paid gross and you will declare the value to US authorities. For further information on NT codes please find my article here.
Can I transfer in a final salary scheme? Yes, you can however as a final salary / defined benefit pension scheme entitles you to protected rights there is a strict process to follow in line with UK pension legislation. For more information on defined benefit pensions and key things to consider when looking to transfer please read my article here.
Can I transfer my UK Pension to a 401K? No, under UK Pension legislation you can only transfe to another recognised scheme by HMRC. In some cases however it may be tax efficient to take the 25% tax free lump sum (tax free in the UK only) and subsequently pay these monies into an IRA / 401K.
Do I have to take the whole 25% in one go? No, you can take 10% to begin with and more later on. The 25% is calculated at the time of requesting to withdraw monies. As such, it often pays off to invest your pension pot and let it grow. For example.£100,000 pension pot = £25,000 tax free. 5 years later, £150,000 pension pot = £37,500.