Guest Post: The Pension You Left Behind

I was approached by Mario, who writes on behalf of the Qrops Group, to see if he could do a guest post about the transfer of funds when moving from the UK to the US and explain a bit more about what to potentially think about and how (qualifying recognised overseas pension schemes) QROPS works.

I have not used the site/group myself (nor received any endorsements or payments), but was curious to find out more, and see if anyone has had any experiences with sorting a pension back in the UK.

Below is the guest post, have a read and let me know what you think.

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Something across the pond called, and you answered. You were whisked away across the sea and are now in a land where people drive on the wrong side of the road. No one has a clue what bangers and mash are. People light off fireworks on the 4th of July instead of the 5th of November. The differences between England and the United States have been legion.

But you have more or less gotten used to life in the States. You have learned to spell it “color” instead of “colour” and go to the mall rather than the shopping centre. Mexican food has finally managed to replace vindaloo as your spicy food group of choice (but only sort of). You have even gotten used to sods calling it “soccer”.

Congratulations, you have adapted!

But have you adapted completely? Did you overlook anything when you set out to become an adopted Yank? When you came over to the U.S. you transferred your pounds into dollars and opened a bank account to put them in. You obtained insurance operated within the United States to protect yourself in case you had to enter hospital. And you’ve been paying the IRS ever since you came over. What more is there?

Have you dealt with your State Pension? If you spent much time working back home before you came over to the States your NIS payments may well have collected into a tidy little pension that is now gathering dust back in the old country. If so, you need to decide what to do with these funds.

Generally, your state pension won’t be available to you until you have reached your state pension age, regardless of which nation you reside in. However, if you intend to retire in the States HMRC will allow you to transfer the funds out of your state pension and into a qualifying recognized overseas pension scheme (QROPS). QROPS are programs abroad that have registered with HMRC as meeting all of the same requirements and protections that are required of UK based pension schemes. This ensures that anyone transferring their funds abroad will not find their pensions placed at risk by unscrupulous local pension providers.

Of the more than 3.000 QROPS out there, there are currently 14 within the United States. Most of these are counted as either IRAs or 401(K)s. [1] This means that it would be possible to transfer your state pension into an IRS recognized IRA or 401(K) as seed money, then continue building it using contributions from a job in America.

There are a number of benefits that can be received by transferring your pension into a QROPS. To begin with, when you start drawing your pension the funds will be paid out in dollars rather than in pounds. This would result in a steady income based on the value of the dollar, rather than having to pay foreign exchanges to convert pounds to dollars, and deal with fluctuating exchange rates. Further, QROPS are not subject to the 55% death tax assessed on UK domestic pensions when they are transferred to a loved one as survivor’s benefits. [2]

One caution does need to be extended regarding engaging in a transfer into a U.S. based QROPS. While the transfer of any pensions under the current Life Time Allowance of £1.25 million will not be subject to tax or penalties from HMRC, this does not necessarily hold true of the IRS. Currently the IRS does not recognize any British pensions in terms of tax relief, so a direct transfer may incur penalties. To be certain, check with a QROPS specialist familiar with the U.S. to be certain your funds won’t be harmed in such a transfer.

Pensions are often overlooked when one of us moves to the U.S. from Albion. In the flurry to get everything packed and moved, have money exchanged and settled in a U.S. bank, and to ensure all of the proper immigration paperwork is filled out pensions can seem so far away that moving them over doesn’t even occur to you. If this is you and you have not transferred your pension to the States, the benefits of a transfer may well be worth looking into.

Mario Vitanelli is a freelance blogger who specializes in writing about international finance and QROPS. When he’s not testing his culinary boundaries or taking scenic photographs, you can find him devouring economic policy publications.

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2 thoughts on “Guest Post: The Pension You Left Behind

  1. Tina Muir says:

    Interesting Molly, I had never even thought about this, but thankfully as I am still 25 and have not yet had a real job to earn a pension, I am hoping I am gonna be okay. That is something to be considered though! Loving your posts, you are becoming my go to for information about the differences between the two countries!

    Like

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