British Expat Pensions in the US

Posted 12th October 2012

If you have been paying into a company pension, private UK pension or a state pension then you might wonder what will happen to your pension when you move to America. Can you claim your pension from US shores? Is it transferable? This article covers the basics of your rights regarding expat pensions.

Claiming UK State Pensions in the USA

The UK has a reciprocal agreement with America so those British expats who have moved to the US are actually in a much better position than pensioners living in Australia or Canada who have the rate of inflation on their pensions frozen from the date they left the UK.

Once you reach retirement age and presuming you have made regular contributions towards your state pension, you will receive your pension at the same rate of inflation as a UK resident. Even if you have not contributed enough to qualify for a full UK pension, so long as you have paid tax in the US then the UK will count contributions made in America towards your state pension. The same applies to qualifying for an American pension as authorities will combine your UK contributions with your US contributions.

To claim tax relief on your UK state pension, just fill in a HMRC US Individual form and an IRS Form 8802 and send it with an $85 fee to your local IRS office in the US.

It is possible to receive both a UK and US pension if you have continued making regular payments to both however you may then be stung for the US Windfall Elimination Provisions. To discover if your payments could be reduced, contact the US or UK social security offices.

Private UK Pensions in the US

If you want to transfer your private UK pension to the US then you need to arrange a transfer through QROPS (Qualifying Recognised Overseas Pension Schemes). As you may have guessed by the name, your UK pension must qualify in order to become transferable, which means that it must provide benefits that are broadly similar to those on offer in the UK. If your pension provider does not meet QROPS conditions then it could be wise to transfer your pension to a scheme that does before you leave the UK.

You can find out more about the QROPS scheme by visiting the HMRC QROPS guide which includes downloadable forms and factsheets.

It may be worth mentioning that on various expat forums no-one has yet managed to successfully transfer their UK private or company pension to the US without incurring charges and penalties. This appears to be an issue with the IRS rather than the HMRC. To find out what others are advising with regards to the transfer of UK pensions, visit a recent thread on the British Expats site discussing UK private pension transfers.

The general consensus is to leave the pension where it is and claim tax relief once you retire and start getting payments.

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