FAQs

As you are unable to “roll-over” you UK pension into your US retirement account, we always advise clients to view their UK pension as just another pension pot that can still be an important part of their overall US retirement strategy. A UK pension can, in the right type of pension plan, be very flexible and work cohesively with your US retirement assets. It is, however, important to understand your retirement objectives so that your UK pension can be managed in line with those objectives. Example objectives include the ability for you to:

• Access your UK pension from age 55 to act as bridge until you wish to access your US retirement account or US Social Security;
• Invest and draw your UK pension in USD to eliminate future exchange rate risks; or
• Pass on your pension to your loved ones or nominated beneficiaries when you pass away.

If you are getting divorced in the US and you have a UK occupational or personal pension, your UK pension may be taken into consideration in your US divorce settlement. The way in which your UK pension is factored into your US divorce settlement will determine what happens to it. For example, your US divorce settlement may simply offset your UK pension with other assets of similar value in the US or elsewhere. This can be the preferred choice for couples.

However, it is not uncommon for Florin Pensions to see a US divorce settlement requiring a UK pension to be “split” so that a portion goes to an ex-spouse. As a US divorce settlement has no legal standing in the UK, for a UK pension provider to “split” a UK pension, the pension provider will require you to obtain a UK court order setting out/confirming the terms of any pension split. Whilst there are various options available to UK courts in divorce settlements, we typically see clients engage UK legal counsel to obtain what is called a UK pension sharing order to implement their US divorce settlement.

In the UK, whilst there are various options available to factor in a person’s UK occupational or personal pension into a divorce settlement, it is not uncommon for a UK pension sharing order to be obtained. A UK pension sharing order enables a portion of a member’s pension to be deducted and allocated to the ex-spouses own registered (HMRC tax approved) pension scheme. The ex-spouses share can either stay in the existing member’s scheme (if permitted by the scheme rules) or be transferred to another registered (HMRC tax approved) pension scheme. Transferring to a separate scheme is usually the preferred choice for both ex-spouses and UK pension providers as it enables a clean break. Other factors to be considered when determining how to implement a US divorce settlement for a UK pension will be the age of the pension member and whether the UK pension is a defined contribution or defined benefit pension.

If you have a US divorce settlement which requires part of your UK occupational or personal pension to be paid to your ex-spouse, in order for a UK pension provider to implement this settlement, a UK pension sharing order will be required as a US divorce settlement has no legal authority in the UK.

The UK Chancellor confirmed in the 2023 Spring Budget that the UK’s Lifetime Allowance (LTA) for pensions would be abolished from 6 April 2024. For the 2023/24 tax year, the LTA will remain in place, and pension providers will still be required to carry out applicable LTA checks, but if your pension savings exceeds your applicable LTA, no LTA charge will be applied.

The UK’s LTA has been the amount of savings you could take from all your UK pension savings (excluding the UK State Pension) without facing a UK tax charge. The LTA applied irrespective of the fact you are no longer a UK resident and/or taxpayer. Since 5 April 2020, the standard Lifetime Allowance has been £1,073,100. You may have certain protections against the LTA, or have applied for a LTA greater than the standard LTA. If you applied for protection in the past, you should have received a certificate to confirm the protection obtained.

What happens to your UK pension when you move to the US depends upon the type of workplace or personal pension you have and whether you and/or your employer are still contributing to your UK pension whilst in the US.

However, assuming there are no further contributions to your UK workplace or personal pension now you are abroad, your UK pension will simply be treated as a “deferred” or “old” pension. You do not lose your pension benefits and at retirement you should be able to access your UK pension.

Living abroad can sometimes restrict the investment options available to you under your UK pension or how you are able to draw from your UK pension at retirement. For this reason, it can be helpful to have a financial adviser review your existing UK pension to determine whether it meets your current retirement objectives.

Unfortunately, the transfer of a UK workplace or personal pension into any US retirement account, including an IRA, is not permitted by the Internal Revenue Service (IRS).

We appreciate that it can be frustrating for clients when we confirm this to them. Many clients retiring in the US simply want to have their retirement assets in one place. However, we advise our clients to make sure their UK pension is in the right type of UK pension plan structured to meet their overall retirement goals so that it can continue to play a meaningful role in their retirement.

Whether or not you can transfer out of a UK defined benefit pension to a personal pension, either in the UK or abroad, will first depend upon whether it is a private sector defined benefit scheme or a public sector defined benefit scheme.

If it is a private sector defined benefit scheme you can undertake a transfer out, subject to certain requirements detailed below. However, since the introduction of the new UK pension freedoms in April 2015, the UK government banned any transfer out from unfunded public sector defined benefit schemes to defined contribution pensions. Examples of unfunded public sector schemes include the NHS Pension and Teachers Pension.

Transfers out of funded public sector schemes (like the Local Government Pension Scheme) and private sector defined benefit schemes to a personal pension are, however, still permitted providing you receive the required financial advice from a UK regulated pension transfer specialist. The requirement for specialist UK financial advice is irrespective of the fact that you are an expatriate living outside of the UK. The only exception to the advice requirement is where your defined benefit pension has a CETV (also known as a ‘cash-equivalent transfer value’) of £30,000 or less.

Deciding whether to transfer your benefits out of a defined benefit pension to a personal pension is a very important decision which will affect the rest of your life. The required specialist UK financial advice will, amongst other things, compare the benefits being given up from your defined benefit pension with those that could be offered by the new proposed pension plan. While transferring benefits from a defined benefit scheme to a personal plan can be the right outcome for some people, it is not appropriate for everyone. Don’t only look at the size of your transfer value, you must weigh up your options and reach the decision that is right for you. This includes considering how you will afford retirement and achieve your retirement income goals.

In order to assist our clients to meet the UK requirement for specialist UK financial advice, Florin Pensions works with an appropriately qualified UK independent financial adviser to prepare Suitability Reports for you taking into consideration your specific circumstances as an expatriate residing in the US.

Yes, usually a UK personal pension can be transferred to another type of UK personal pension plan (like a self-invested personal pension) and/or a different UK personal pension plan provider. However, it is worth noting that some UK pension providers will not accept US residents as new clients.

In most cases, when you turn 55 (or 57 from 2028), you have several options to access your UK workplace or personal pensions. How and when you start to access your UK pension(s) will depend on your retirement goals and the type of pension(s) you have. Options can include:

• Doing nothing
• Flexi-access drawdown
• 100% lump sum payment
• Partial lump sum payments
• Annuity
• Drawing your defined benefit pension
• Taking the CETV of your defined benefit pension and transferring it into a personal pension to access other retirement income options
• Choosing a combination of the above to suit your specific retirement goals

Living in the US can make it hard to know what UK retirement income options will best meet your retirement goals. It can be complicated to compare the options yourself and what is best for you will depend on many factors. We can help. To learn more about the options available contact a Florin Pensions advisor.

Please note that Florin Pensions is not qualified to give tax advice and we do not give tax advice. However, as UK pensions advisors, we are aware of certain US/UK tax matters that can impact our clients. Given the US tax compliance complexities involved with non-US financial assets, we recommend that clients seek specialist US/UK tax advice from appropriately qualified tax and/or legal professionals.

If you have income from one country and are resident in another, you may be liable to pay tax in both countries under their tax laws. To avoid “double taxation”, the UK has negotiated double taxation treaties with countries like the US (the US/UK DTA). Thankfully, the US/UK DTA has sections specifically dealing with pensions. Whilst there is some debate amongst tax professionals on certain provisions of the US/UK DTA relating to pensions, it does enable US residents to apply for relief at source or to claim repayment of UK income tax on their pension income payments (including from personal pensions and the UK State Pension). In accordance with the US/UK DTA, that pension income should then only be subject to applicable tax in the US.

In the UK, HMRC assigns the tax code that your pension provider must use to work out how much UK income tax should be taken from your pension payment. Excluding any payment forming all or part of your UK pension commencement lump sum (PCLS), UK pension payments are made (and taxed) through the PAYE system, in the same way as earned income.

As a non-UK resident, you may not have an active UK tax code so when the first pension income payment is made, HMRC will apply an “emergency tax code” which generally results in a higher level of tax being deducted. Emergency tax codes are temporary and HMRC will usually update your tax code for future payments to a likely lower rate.

However, in our experience, it is preferrable for a US resident taking UK pension income to apply for an UK NT code and receive pension income gross of UK income tax. You are also able to claim a repayment of any UK income tax previously deducted by HMRC.

To obtain a UK NT code, specific IRS and HMRC forms must be completed. The process can take months to over a year, and we always recommend that clients start the application process well ahead of the time they wish to take any pension income payment gross of UK income tax. At Florin Pensions we frequently assist clients with the UK NT code application process.

Please note that Florin Pensions is not qualified to give tax advice and we do not give tax advice. However, as UK pensions advisors, we are aware of certain US/UK tax matters that can impact our clients. Given the US tax compliance complexities involved with non-US financial assets, we recommend that clients seek specialist US/UK tax advice from appropriately qualified tax and/or legal professionals.

As a general rule, US taxpayers (being citizens and residents) are subject to US tax on their worldwide income. This would include pension income payments drawn from a UK pension. In addition, even if pension income is not being drawn from a UK pension, the US requires informational reporting on certain non-US financial accounts exceeding applicable monetary thresholds. Non-US financial accounts can include UK pensions, for example personal pensions. The specific US tax filing requirements for non-US financial accounts, including UK pensions, can get complex. Consequently, we recommend that a US taxpayer with a UK pension discuss their filing responsibilities with their tax or legal advisor.

We know that it can be difficult to find up-to-date information on a client’s UK pension, particularly if the client has accumulated a few pensions over the course of their employment in the UK. To assist, we will ask your client to complete a Florin Pensions’ Authorization. This authorization enables our team to assist in locating each UK pension provider and then request up-to-date information on your client’s UK pension(s) including current value, investments, and benefits. We can then use this information to have a complimentary consultation with you and your client to discuss our findings and confirm any next steps.

Florin Pensions does not provide US wealth management advice. We exclusively advise on UK pensions. This enables us to partner with other advisors our clients already work or may work with in the future, like US wealth managers, accountants and/or lawyers.

In simple terms a person should, in most cases, be able to transfer a QROPS into a UK SIPP, however, there are important factors that should be considered on a case-by-case basis before doing so.

A QROPS (or Qualifying Overseas Pension Scheme) is a personal pension scheme set up outside of the UK (and regulated as a personal pension scheme in the country where it is established) but recognized by UK HMRC. QROPS can receive transfers from UK-registered pension schemes. A popular jurisdiction for QROPS transfers has been Malta.

As a result of changes to pensions and tax legislation/guidance in 2015, 2017 and even 2021, the benefits of a QROPS over a UK personal pension like a SIPP for expatriates have significantly diminished. This is particularly the case for US residents/taxpayers.

If your client is currently in a Malta QROPS, it is possible to transfer the pension assets back to the UK into a UK personal pension. Reasons for considering such a transfer can include having a more cost-effective pension structure in a jurisdiction the client is more familiar with. However, whether a transfer from a Malta QROPS to a UK SIPP is advisable will very much depend upon the client’s individual circumstances. If you would like to learn more, contact a Florin Pensions advisor.

The transfer of a UK occupational pension scheme or personal pension plan to any US retirement account is not permitted by the Internal Revenue Service (IRS). However, there can be benefits to transferring your UK pension to a fully flexible UK pension like a Self-Invested Personal Pension (SIPP). Before determining whether a pension transfer could be of benefit, it is important for a financial advisor to understand your retirement needs and objectives.

The retirement options available to you under your existing UK pension(s) will depend upon the type of UK pension you currently have (for example, whether it is a defined benefit or defined contribution pension) and what retirement options the scheme offers you.

In most cases, when you turn 55 (or 57 from 2028), you have several options to access your UK workplace or personal pension. However, as UK pensions’ legislation has changed over time, the retirement options available under different UK pensions can vary widely with some offering flexibilities and others being quite restrictive.

Options can include:

• Doing nothing
• 100% lump sum payment
• Partial lump sum payments
• Annuity
• Flexi-access drawdown
• Drawing your defined benefit pension
• Taking the CETV of your defined benefit pension and transferring it into a personal pension to access other retirement income options
• Choosing a combination of the above to suit your specific retirement goals

How and when you start to access your UK pension(s) will depend on your retirement goals. For this reason, we feel it is important to understand your retirement options before starting to draw your UK pension.

On 6 April 2015, the UK government introduced new UK pension freedoms which are revolutionizing how people are now able to access their UK personal and occupational pensions. Examples include the ability from age 55 to draw as much or as little from your pension as desired with no upper limit (or the need to purchase an annuity) and the ability to pass on your pension to the beneficiaries of your choice.

All these freedoms now offer great opportunities for UK pensions and general wealth planning. However, for the British expatriate living in the US, there are two important questions to consider:

• Will your existing UK pension provider afford you all of these freedoms – many do not as there is no legal obligation to do so; and
• If your provider does offer these freedoms, how can you best utilize them?

By undertaking a review of your UK pension with a financial adviser, you can determine what retirement options you have under your existing UK pension(s) and whether these options are flexible and/or meet your retirement objectives. If your existing pension does not offer the types of flexibilities that you desire this could be a reason to seek a pension transfer.

A concern for many people is how their beneficiaries will manage financially when they die. The pension benefits your beneficiaries may receive can differ considerably depending upon the type of UK pension(s) you have and whether you have already started to take pension income.

If you have a UK defined benefit pension it is important to review the scheme rules to understand what death benefits are provided. Typically, your spouse will be entitled to a percentage of your annual pension per annum (indexed link). This is often 50% of your pension. A death benefit lump sum may also be payable. A percentage of your pension may also be payable to children under the age of 18 (or 23 if in full time education), however, this is not always the case.

For defined contribution pensions, if you haven’t drawn any pension income yet, your beneficiaries should have several options including taking a lump sum, purchasing an annuity or potentially drawing the pension flexibly under flexi-access drawdown. However, not all UK pension plans offer all options. In some cases, it can make sense for a beneficiary to transfer to another UK pension provider for more pension benefit options.

If you have already started to take pension income through flexi-access drawdown, your beneficiaries can take the remaining funds as a lump sum, purchase an annuity or continue with flexi-access drawdown. However, if you already purchased an annuity, what is payable will depend upon the type of annuity that you purchased (for example single or joint life).

At Florin Pensions we help our clients’ beneficiaries understand what pension benefits they are entitled to and determine the right options for them to access them.

What is a SIPP?

A SIPP (or Self Invested Personal Pension) is a type of UK registered personal pension that, as opposed to a conventional UK personal pension, can offer greater flexibility and individual control. In many ways, it is similar to an Individual Retirement Account (IRA) in the US.

SIPPs have typically always been more flexible than other types of UK pensions, particularly older employer or insurance company pension schemes. Since the UK pension flexibilities were introduced in April 2015, SIPPs have offered even greater retirement and wealth planning opportunities.

What is an “International SIPP” or “Expat SIPP”? Are they different to a SIPP?

An International SIPP, an Expat SIPP and a SIPP are all regulated in the UK in the same way. As a result, it could be argued that the terms are used largely for marketing purposes.

However, it is true that not all SIPPs are created equally. For example, some SIPP providers will not accept non-UK resident clients or offer other benefits like being able to invest and draw from a SIPP in multi-currency.

If a SIPP is not called an International or Expat SIPP, do not assume it will not meet your needs as a non-UK resident.

In fact, if an advisory firm recommends that you invest in an International SIPP, we recommend that you confirm the structure and charges in full. As cautioned by the UK’s FCA in 2020, some overseas advisory firms have recommended that people invest their pension funds through an offshore investment bond within an International SIPP. This could expose you to high and/or unnecessary charges. The tax benefits of investing through an offshore bond are, as the FCA notes, “largely redundant to someone investing in a UK personal pension scheme”.

At Florin Pensions, we have never recommended offshore bonds to our clients. We work with a panel of UK pension providers so that we can select with clients the pension provider that best meets their needs.

​Whether or not you should transfer your final salary pension to a Self-Invested Personal Pension (SIPP) will depend upon a number of factors which should be carefully considered with your financial adviser. As required by UK pensions legislation, your financial adviser should commission a pension transfer report from an appropriately regulated UK financial adviser (unless the transfer value is £30,000 or less). This report is commonly referred to as a Transfer Value Analysis (TVA). A TVA compares the benefits being given up from a defined benefit pension scheme with those that could be offered by a personal pension scheme like a SIPP. Factors that should also be considered by your financial adviser include your personal circumstances, retirement objectives, financial situation and investment risk profile.

A final salary pension promises to pay a pension for life, providing the pension has sufficient assets to meet its liabilities. Such a pension also increases to keep up with inflation (but often capped to 2.5% or 5% p.a.). A move to a personal pension, like a SIPP, offers more flexibility in terms of benefits, but you must rely on its investment performance which is unguaranteed and could mean the risk of lesser income than if you remained in your final salary pension.

However, some people do opt to transfer out their final salary pensions to meet their specific retirement objectives. Some examples include: if you are single and don’t need the benefits offered to a spouse/dependent; you want to take early retirement; you want to have access to your pension in amounts and at times under your control; you want to hold and draw your pension in a different currency like US dollars; you want to pass on to your spouse 100% of your death benefits; you have a long term partner, but are not married, and want that person (or any other relative for that matter) to inherit your pension on your death; you have an important and immediate cash need; or there is clear evidence that your pension scheme has a significant funding deficit and may not be able to meet its liabilities in the future.