UK Pension Transfer to USA Providers
Transferring a pension from the UK to the USA is not always a straightforward process. Both HMRC and it’s US equivalent the IRS have very strict rules around the movement of funds in and out of their respective countries.
In this article, you’ll learn about transferring a UK pension to the USA (and vice versa). You’ll also learn how the process varies depending on the type of pension you want to transfer – and what to do if your type of pension is not accepted by HMRC or the IRS.
Read from top to bottom for all the information on this topic, or use the links to jump straight to the information you want:
What do I need to know?
UK pension transfers to the USA are not always as simple as you might hope. However, you’re far from alone in taking this step, and the experts we work with have good experience of helping clients in this situation. They will be happy to take a look at your circumstances and help determine the best way to transfer a UK pension to the US for you.
Below, we’ll cover various kinds of pensions and what to do if you want to transfer them, as well as the alternatives.
Can I transfer a UK pension to the USA?
This may be possible in some circumstances, but perhaps a better question to consider is how you can access your UK pension in the US.
The first thing to bear in mind is that you don’t necessarily have to transfer your pension from the UK to the US to be able to draw from it.
In fact, there’s a very limited number of schemes that HMRC actually allows you to transfer into.
These are called Registered Overseas Pension Schemes (ROPS): ROPS are pension plans outside the UK which HM Revenues & Customs (HMRC) has officially approved for pension transfers. You will only be able to transfer your UK pension if the American pension you are transferring into is a ROPS.
Under current legislation, you’re not able to transfer a UK pension into an American pension scheme such as an IRA or 401(k) – these don’t qualify with HMRC as a ROPS.
What are the alternatives to pension transfers?
With that aside, you can draw from a pension that is registered outside of the US (for example, by keeping a pension in the UK). The tax implications around this are complex so you will need to seek expert advice. It’s also worth bearing in mind that not all UK pension schemes will pay directly into a US bank account.
If this is something you’re considering, get in touch. One of the pension experts that we work with can find out the most tax-efficient way for you to approach drawing a pension in the US.
What types of UK pensions can be transferred?
If you do decide to go ahead with a pension transfer from the UK to the USA, there are also certain rules around the types of UK pensions you can transfer out of.
Below are some examples of common British pension types, but don’t hesitate to contact us if you need advice on transferring another type of scheme.
UK state pension
The UK and the US share a social security arrangement. So, this is probably the most straightforward scenario.
In this instance, you don’t actually need to transfer a UK state pension to the USA, instead, you simply nominate an American bank account to pay your UK state pension into and it works much the same as it would back in the UK.
As in the UK, your pension will remain inflation-linked and, assuming you pass the standard security checks, you should be able to draw an income.
If you want to transfer a UK personal pension to the USA (for example, a SIPP), you’d be able to transfer to a ROPS. However, at the time of writing, there are only two US pension schemes that have ROPS status.
Both of these schemes are Simplified Employer Pensions and are offered by Supply Chain RFID Consulting LLC or Transform Group.
If you’re not an employee of one of these firms, there’s no straightforward way to transfer your UK pension to the US.
But don’t let this put you off moving or withdrawing from your UK pension; there are lots of alternative options for doing so, and an expert pension transfer advisor can help you find what would work best in your situation. Make an enquiry and we’ll match you with one of the pensions experts we work with.
Workplace pension funds
You could theoretically transfer your workplace pension to a ROPS – but the same caveat applies around the limited number of US-based ROPS.
It also depends on the workplace pension’s policy. You’d need to speak to your provider, or get in touch with one of the experts that we work with. They’ll be able to look into this for you.
Pension transfer charges and costs
There’s a 25% tax charge for transferring your UK pension into a ROPS. There are a few exemptions to this charge, but if you move out of the US or you want to transfer your ROPS to another country within 5 years, you may still have to pay the 25% tax charge.
If you try to transfer your pension into a US scheme that doesn’t qualify as a ROPS, you could incur a 55% tax charge which both you and the pension scheme will have to pay. This means that most UK providers won’t allow you to transfer your funds into a non ROPS US pension scheme.
The restrictions on pension transfers from the UK to the US and the tax charges mean there are very limited options and these can be costly.
It’s always recommended you consult a pensions expert who can help you find alternative options to save you hassle and protect your hard-earned pension funds.
Get in touch to discuss potential alternatives with one of the experts we work with.
How to transfer a UK pension to US
To transfer a UK pension to the US you’ll have to first check to see if you can transfer your funds into one of the two US schemes which officially qualify as a ROP.
Most UK pension providers will block you from making any attempt to transfer your funds to a US scheme not approved by HMRC as a ROP, as you could incur a 55% tax charge on your pension funds if you do so. And, even if you are able to transfer into a US-based ROP, you’ll likely be faced with a 25% tax charge.
With this in mind, it may not always be in your best interest to transfer your UK pension to the US, but there are alternative ways to move, access or transfer your money.
A pensions expert can advise you on how to best transfer your UK pension to help facilitate your move to the US. With expert advice, you’ll soon be on your way to the results you want – with the right tools for keeping your investments safe.
Make an enquiry with us today and we’ll connect you to the right advisor for your specific needs.
Can I use a QROPS to transfer a UK pension to the USA?
You can, although your options may be somewhat limited, so it’s important to seek expert advice before you proceed.
The first point is that ‘QROPS’ are now generally referred to as ‘ROPS’ – and that’s how we’ll refer to them from now on.
In fact, there are only two such schemes currently listed on HMRC’s ROPS list – ‘Supply Chain RFID Consulting LLC SEP’ and ‘Transform Group Simplified Employee Pension Plan’.
These are both workplace pensions and it’s unlikely that you’d be able to transfer your pension to them if you’re not part of either company.
Transferring an Irish pension to the USA
The same caveat around ‘transferring’ vs. ‘drawing’ applies here.
Transferring an Irish pension to the USA will depend on the kind of pension you’re looking to transfer.
Irish state pension
Again, this is probably the most straightforward scenario.
Ireland and America share a Social Security agreement in which the tax contributions you make in Ireland can help you qualify for an American state pension.
This also works in reverse (as in, you can qualify for an Irish state pension through contributions made in the US).
So, assuming you’ve made enough contributions to qualify – you should be able to draw your Irish state pension whilst living in America, whilst enjoying inflation-linked pension growth over time.
Irish PRSA pension
This may be a possibility but there are many complicating factors.
The rules state that you must be employed in the US, and any transfer you do make will be liable to income tax, USC and PRSI. As such, the possibility of a large tax bill could make a transfer prohibitive.
The transfer will probably also have to be approved by the IRS, and provide what are called ‘relevant benefits’, equivalent to what you’d get if you kept your pension in Ireland.
Again, if this seems complex or hopeless – don’t worry. Get in touch and one of the pension experts we work with will help you explore your options.
Irish occupational pension
Theoretically, Irish occupational pensions can be transferred overseas, but many of the same restrictions as seen in PRSAs apply. If in doubt, seek professional advice.
Can I transfer my pension to a 401(k) in the US?
Unfortunately not. We’re often asked how to transfer a UK pension to a 401(k), and the reality is that it’s not possible under the current legislation.
At the time of writing, there are no IRA or 401(k)s that are recognised by HMRC as ROPS. The IRS does not usually allow foreign pensions to be transferred into 401(k)s or IRAs.
Still, as we said earlier, you don’t have to transfer a pension to a 401(k) to draw from it. It’s usually possible to keep your pension in the UK and draw it from there.
If you’d like to find out more about how this works, one of the experts we work with will be happy to answer your questions and advise you of your available options. Make an enquiry to find out more.
Can I transfer a UK pension plan to a US IRA?
Unfortunately not. Though a US IRA and a UK SIPP are quite similar, the SIPP rules hold firm, and you can’t directly transfer from one to the other. However, don’t forget that it’s still entirely possible, in most cases, to draw from your British pension while living in the US.
Can I transfer my 401k to a UK pension?
We also often hear from American expats wanting to know if they can transfer their 401k to a UK pension scheme, and unfortunately the short answer is no: transfer of 401(k)s to UK pensions is not currently recognised by HMRC – so, at the time of writing, it’s not possible to carry out a 401(k) transfer to a UK pension.
Don’t despair, there are other ways to access a US pension in the UK – but it all depends on your circumstances.
If you’d like to find out more – speak to an expert. Get in touch and we’ll connect you with one of the pension specialists we work with.
Talk to an expert on UK pension transfers to the USA today
If you’re ready to enjoy a fresh start in the US, it’s important to get your finances in order and keep a good grip on your UK based financial investments and pensions. Moving overseas is an exciting time and you don’t have to let the red tape involved with transferring a pension put you off making the important transition.
A pensions expert can help make the process smooth and straightforward by talking you through your best options. They understand the complications involved in a UK to US pension transfer and are well-versed on the right alternative methods for making this possible.
If you’d like a consultation on how to transfer a UK pension to the USA and want to speak to an expert for the right advice, call 0808 189 0463 or make an enquiry.