Am I entitled to receive my UK State Pension and US Social Security Pension?
Yes, providing you have made sufficient contributions in each country. (more)
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.
If you have exported your UK pension fund to a Qualifying Recognized Overseas Pension Scheme (QROPS), and if you are a non-resident of UK and have lived outside UK for at least 5 years, you are permitted, in some jurisdictions, to withdraw cash exceeding 25% of the exported pension fund. Such an encashment could be subject to tax assessment in your country of residence.
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” levels range between zero and a maximum set by the Government Actuaries Department (GAD) which reviews them every three years before age 75 and annually thereafter.
How soon can I draw my UK frozen occupational or personal pension?
Until April 2010 the minimum age at which retirement benefits could be taken in UK was age 50. Thereafter it was raised to age 55. In some HMRC-approved overseas jurisdictions the minimum age remains at 50.
What are my “Protected Rights” or “Guaranteed Minimum Pension”?
Those individual members who contracted out of the State Earnings Related Pension Scheme (SERPS) – also known as the State Second Pension (S2P) – were obliged to accept an alternative provision as part of their occupational pension. This element is known as “Protected Rights” or “Guaranteed Minimum Pension” (GMP). Until the introduction of tax simplification legislation on 6th April 2006 it was treated in a more restrictive manner. From April 2012 the Protective Rights element has been merged with the Non-Protected Rights or “Ordinary Rights” element. Protected Rights benefits can now be taken at the same time and in the same manner as “Ordinary Rights” benefits. From 1st October 2008 “Protected Rights” funds can also be invested in the same manner as “Ordinary Rights” funds.
What happens when I die ?
The terms of your existing occupational pension will be stated in your Statement of Benefits – which UK Pension Transfer LLC will obtain for you as part of its research. Normally, 50% of the member’s pension will be paid to the surviving spouse and additional amounts may be payable to dependent children until they attain the age of 16. A transfer of the member’s pension can substantially improve the death benefits. For example, a transferred pension could provide the whole fund in tax free cash if the member died before taking retirement benefits. If death occurred after retirement, 100% of the member’s Drawdown Pension Income can be assumed by the spouse or named beneficiary. Alternatively, the value of the remaining fund can be paid to the beneficiary in cash. – subject to a one-time tax of 55% if the pension remains in UK.
Your NI pension will not continue after your death – but for married members a widow’s pension then becomes payable.
When can I claim my UK “State” or “National Insurance” Pension ?
The normal State retirement age for men born before 6th December 1953 is age 65. From December 2018, State Pension age for women and men will gradually increase from 65 and reach 66 by October 2020. Over a ten year period, which started on 6th April 2010, the state pension age for women will change from 60 to 65. This means women born before 6th April 1950 will reach pension age at 60. Women born on or after 6th April 1955 will reach pension age at 65. Women born between 6th April 1950 and 6th April 1955 will reach pension age at age 60 plus one month for every month or part of a month that their date of birth falls after 5th April 1950. For these women Retirement Pension will always be awarded from the 6th of the same month. A claim should be submitted within 3 months – either side of your 60th birthday if you fall into this category. Otherwise the claim should be submitted within 3 months on either side of your 65th birthday. Write then – or for an estimate now – to:- International Pensions Centre, Tyneview Park, Newcastle Upon Tyne, NE98 1BA UK. Tel:- +44 191 218 7777 Fax:- +44 191 218 7021. To qualify for any NI pension entitlement a minimum of 9 contributions years is required and this will only provide a small percentage of the full Standard NI Pension which requires 33 contribution years in a 44 year career. Until retirement age a British expatriate can make voluntary contributions to enhance the entitlement. These can be paid-up in arrear for a maximum of 6 years and the payment of arrears can be spread by easy installments. When the pension is paid to you it can either be credited to a UK bank account or to your bank account in USA, Canada or other country of residence. It can be paid at 4-weekly intervals. Residents of USA (but not Canada) in receipt of a UK NI pension will benefit from any increments granted by the UK Government.
Where can I invest my UK occupational pension fund ?
Your existing occupational pension can only be invested as the trustees decide – unless it is a Personal Pension Plan where you can select from a range of investment funds offered by the pension provider. If you transfer your amalgamated pensions to a Qualifying Recognized Overseas Pension Scheme (QROPS) you can instruct its trustees to place investments in any form of negotiable security approved for this purpose by the trustees. This currently includes UK commercial property.
Will I have to pay tax on my UK pension income ?
Yes. However, where a double-taxation convention exists with UK, tax will only be payable in your country of residence on the income withdrawn. You are advised to consult a local accountant about tax.
Will USA tax my Cash Lump Sum Benefit if I import it?
No – according to expert opinion. However, you are advised to consult a CPA on this matter. Under the Treaty between UK and USA the “Pensions Article” 17.1, Sub-paragraph (b), determines the tax treatment of pension distributions. Article 1.4 (the Savings Clause) – which might otherwise cause US citizens to be assessed for tax on the lump sum – does not apply. It is excluded by Article 1.5 which makes an exception of pension distributions from pensions recognized by USA. These include pensions issued by a “contracting State” – i.e. a country which has a Treaty with USA. If such a pension distribution is intended to be exempt from tax in the country of issue, had the recipient been resident in that country, then it will remain exempt from tax in any other country in which the recipient resides. This includes USA. This also applies to the Treaty between the UK-approved jurisdiction of Malta and USA.
Please note, the services described above are not available to current UK residents.