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No, You Can’t Roll A UK Pension Into A US 401(k) or IRA
A simple question—can a UK pension be rolled into a US IRA or 401(k)?—opens a door to some of the most punishing rules in cross‑border retirement planning. We walk through the hard stop that HMRC’s QROPS regime creates, why no US plans qualify, and how an “unauthorized payment” can unleash a 55% UK charge that vaporizes decades of savings. Then we pressure-test the popular third‑country workaround, showing how the 25% overseas transfer charge, US income tax, and foreign trust reporting can turn a detour into a double‑tax minefield.
The conversation shifts from escape routes to smart management: keep the pension in the UK, but invest with the US tax code in mind. That’s where an international SIPP shines. By consolidating old schemes, cutting fees, adding currency flexibility, and—most importantly—letting you hold US‑compliant assets, an international SIPP helps you avoid the IRS’s PFIC regime that punishes many UK-domiciled funds. We dig into the practicalities of building a portfolio inside a UK wrapper that the IRS can live with, so you can protect returns and simplify your US tax life.
Finally, we map out withdrawals under the US–UK treaty. The often‑quoted 25% pension commencement lump sum can be tax‑free in the UK and federally tax‑free in the US, while the remaining drawdowns are generally taxed only where you live. But there’s a twist that catches many savers: states aren’t bound by federal treaties. Depending on your state of residence at the time you take the lump sum, a “tax‑free” benefit may be subject to state income tax. We break down the planning moves that matter—timing, residency, and coordination with your broader retirement picture—so you avoid penalties, sidestep PFICs, and keep more of what you’ve earned.
More information at No, You Can’t transfer a UK Pension into A US 401(k) or IRA. (https://investingforexpats.com/uk-pension-transfer-to-usa)
If this helped clarify your path, follow, share with a friend facing cross‑border pension choices, and leave a quick review so more people can find the show.
Send us a text
Moving, Working, and Investing for Americans Abroad
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By The Expat SageA simple question—can a UK pension be rolled into a US IRA or 401(k)?—opens a door to some of the most punishing rules in cross‑border retirement planning. We walk through the hard stop that HMRC’s QROPS regime creates, why no US plans qualify, and how an “unauthorized payment” can unleash a 55% UK charge that vaporizes decades of savings. Then we pressure-test the popular third‑country workaround, showing how the 25% overseas transfer charge, US income tax, and foreign trust reporting can turn a detour into a double‑tax minefield.
The conversation shifts from escape routes to smart management: keep the pension in the UK, but invest with the US tax code in mind. That’s where an international SIPP shines. By consolidating old schemes, cutting fees, adding currency flexibility, and—most importantly—letting you hold US‑compliant assets, an international SIPP helps you avoid the IRS’s PFIC regime that punishes many UK-domiciled funds. We dig into the practicalities of building a portfolio inside a UK wrapper that the IRS can live with, so you can protect returns and simplify your US tax life.
Finally, we map out withdrawals under the US–UK treaty. The often‑quoted 25% pension commencement lump sum can be tax‑free in the UK and federally tax‑free in the US, while the remaining drawdowns are generally taxed only where you live. But there’s a twist that catches many savers: states aren’t bound by federal treaties. Depending on your state of residence at the time you take the lump sum, a “tax‑free” benefit may be subject to state income tax. We break down the planning moves that matter—timing, residency, and coordination with your broader retirement picture—so you avoid penalties, sidestep PFICs, and keep more of what you’ve earned.
More information at No, You Can’t transfer a UK Pension into A US 401(k) or IRA. (https://investingforexpats.com/uk-pension-transfer-to-usa)
If this helped clarify your path, follow, share with a friend facing cross‑border pension choices, and leave a quick review so more people can find the show.
Send us a text
Moving, Working, and Investing for Americans Abroad