Frequently Asked Questions
Am I entitled to receive my UK State Pension and US Social Security Pension?
Yes, providing you have made sufficient contributions in each country. However, where the maximum standard UK NI pension is being drawn, a proportion of the USA Social Security payment may be subject to offset. If you do not have enough insurance for a UK pension the agreement between the US and UK allows the UK to treat US insurance as UK insurance.
Can I add money to my UK pension ?
If you have net relevant UK earnings while you are non-UK resident or if you return to reside and work in UK you can then “unfreeze” your occupational pension. If you have a Personal UK Pension which commenced while you were still resident in UK you may continue paying its premiums while living outside UK subject to annual limits.
Can I cash the whole of my UK frozen occupational pension fund?
As long as your pension is provided from UK by a UK pension provider it has to follow UK pension legislation. This does not permit you to cash the whole of your pension fund unless the total of your combined UK occupational pension funds – excluding the National Insurance Pension – is valued at less than £18,000. It would then be considered “Trivial”. Trivial pensions can be cashed completely but not before age 60. Where your total funds exceed £18,000, the maximum that can be cashed is 25% of your pension fund. It can be taken all at one time or in stages. The total amount is only allowed once and is known as the Pension Commencement Lump Sum (PCLS). This optional cash benefit applies equally to the Protected Rights and the Non Protected Rights elements, which were merged in April 2012, and is granted free of UK income tax. It can be taken from the minimum pension age onwards. From April 2010 onwards the minimum age in UK has been 55. The remaining 75% of all elements of the pension fund must be applied to provide an income benefit but the income can be deferred until age 75, or any earlier age after age 55, if it is not required when the 25% PCLS is taken.
From April 2015 personal pensions-which are defined as “Defined Contribution Schemes” or “Money Purchase Schemes” can provide “Flexible Access” to the remaining 75% after the PCLS has been taken. This allows the pension holder to withdraw additional lump sums as well as income installments. However, there is a tax liability on these withdrawals.
Can I have my UK pension paid to me in USA ?
Yes. Your occupational frozen UK pension – and your NI pension – can be paid to you by installments – arising in GB pounds and converted to US dollars. Your occupational pension will offer you a choice of installment frequency. Your NI pension can be paid at intervals of 4 weeks or 13 weeks.
Can I import my UK frozen pension fund to USA and add it to an IRA or 401K ?
No. The United States IRS will not permit it. UK Pensions can only be transferred to a US pension where the UK pension plan meets the pension rules of the IRS tax code. No UK pension plan seeks to meet the US requirements. The benefits and terms of UK pensions are considered to be over-generous by the US tax authorities. This import restriction even applies when the receiving scheme is an HMRC-approved Qualifying Recognized Overseas Pension Schemes (QROPS) already established in USA.
Can I improve my UK occupational pension fund before I retire ?
Usually, yes – by instructing UK Pension Transfer LLC to discover an alternative pension provider which can offer you enhanced benefits and which is willing to accept the transfer of your pension in the light of your current resident status. An improvement can be effected by transferring your pension fund to one that can offer superior terms that take account of all the changes in pension legislation and can offer freedom of investment choices, investment skills and opportunities. Before drawing your NI pension you are entitled to make voluntary contributions which will enhance it if its current estimate is below the level of the Standard Pension.
Can I take my 25% cash sum without taking a pension income?
Yes. However, when you reach age 75 you must either buy a pension annuity with the remainder of your fund or commence a Drawdown Facility whereby income is distributed direct from the pension fund by its provider. The permitted maximum level of income withdrawn is calculated by reference to a formula created by the UK Government Actuaries Department.
Do I have to buy an annuity to provide my UK occupational pension income?
No. Providing your fund – net of any optional 25% cash withdrawal – qualifies in size, it can opt for a “Drawdown Income” facility. The pension will then be paid direct from the fund and not from an annuity. You can thereby continue to control the pension capital and its investment. The Drawdown Facility can be continued indefinitely beyond the earlier age restriction of 75. However, after taking benefit you can buy an annuity whenever it suits you with all or part of the available fund. The optional “Drawdown
Income” is unlimited. The Government Actuaries Department (GAD) which reviews
them every three years before age 75 and annually thereafter.
Why Is My UK Pension Frozen?
Your UK pension may be frozen for several different reasons, depending on what type of pension is frozen: a state pension or a private pension. Click here, to find answers to explain both types of frozen UK pensions.