Providing information and clarity

for British Expats looking to Transfer their UK Pension Offshore

 

United States Recognised Pension Schemes (US-RPS)

 

As of 1 Jan 2011 a new Double Taxation Agreement (DTA) between the US and a number of secure, tax efficient locations world wide, has resulted in a limited number of offshore pension Schemes now being recognised by the United States Government as qualifying Pension Schemes.

 

What is the current situation for a UK Expat that is Retired or planning to Retire in the USA?

 

U.S. Qualifying Scheme - Currently no UK Pension Scheme is recognised by the Unites States (US) Government as a qualifying Pension Scheme. Therefore Pension income from the UK will be taxable in some states.
   
Income Tax in the United States - In the USA there are 7 states that have no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Tennessee and New Hampshire only tax certain amounts of dividend and interest income.
   
Pension Income - Many states exempt some or all federal, state, and local government pensions from state income taxation - those include Alabama, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, New York, and Pennsylvania in addition to the above 7 mentioned. UK Expats can not take advantage of this unless the retirement income comes from a U.S. recognised scheme.
   
Transfer to a USA Scheme - Most schemes that allow Unites States (U.S.) resident transfers will not accept a transfer from the UK unless the value is above GBP 500,000.
   
UK Taxation on your Pension - As a UK expat retiring in the U.S. you will be paying tax at source in the UK in addition to being exposed to income tax in the state you choose to retire.
   
Currency Fluctuation - As there is a significant variation between the British Pound and United States Dollar, This can have a huge impact on your Pension Income.
   
Inheritance Tax & Tax Recovery Charge- Currently any Pension left int he UK will be subject to a 55% 'Tax Recovery Charge', with the addition remaining fund accounted for in your estate, which may also result in an additional 40% Inheritance Tax Charge.
 
What are the advantages of a U.S. Recognised Pension Scheme (US-RPS) to a UK Expat Retiring in the USA?

 

Low Establishment Restrictions - Unlike some U.S compliant shemes that require a minimum of GBP 500,000 a Unites States Recognised Pension Scheme can be established with as little as GBP 50,000 Pension Transfer.
   
Tax Free U.S. Pension Income - one of the main advantages if you live in a tax free state, is that your pension income may no longer be taxable at state level (in certain states) in the USA*, if you move your Pension from the UK to US-RPS.
   
Zero UK Income Tax - Moving your pension outside of the UK into a US-RPS will result in your pension income being paid Gross and free of UK income tax. This income however may be taxable in certain states and on a federal level*.
   

Nil Inheritance Tax - In the event of Death as long as you have been outside of the UK for a full 5 years the fund can pass onto your family IHT free.

   
US Estate Tax - In the event of death in the USA, as per the IRS website, no estate taxes are required to be filed for assets with a cumulative value of less than $5m (2010 onwards). See this LINK
   
Significant Investment Choice - You will no longer be limited to UK investment funds or the fund choice of your UK Pension Scheme.
   
Currency/Forex contracts - are available to ensure you achieve the best possible exchange rate for your pension fund rom GBP to USD.
   
100% Capital Protected Investments Available
 
Can we Help? - If you are a British expat either currently retired in the Unites States (U.S.) or you plan to retire in the U.S. we can help review your current pension to ensure it is in the most tax efficient structure for your retirement.

 

You could be saving you and your family significant amounts of Pension income that could currently be lost.

 

Contact us today via our online form for a FREE consultation.

 

   
   
  *It is however always recommended to seek qualified tax advice for state and federal taxes.
   
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