When migrating from the UK to the USA, a UK pension member would need to take expert advice when making the decision to either leave their pensions in the UK or to transfer their UK benefits to an overseas scheme.
Transferring UK Pensions Overseas
The first point to consider is that it is not currently possible to transfer UK pensions directly to an equivalent retirement benefits plan in the USA. This is because the US Internal Revenue Service (IRS) does not allow pension transfers into their schemes.
However, it may be possible to transfer UK pension benefits to an overseas pension in another country or jurisdiction.
A transfer from a UK pension to an overseas scheme is only possible providingthe receiving overseas scheme is a Qualifying Recognized Overseas Pension Scheme (bdhSterling) under UK pension regulations.
Transferring to a bdhSterling could have the following attractions:
- Income payments could be paid gross at source
- It may be possible that income levels from the new scheme could be greater than a UK scheme
- Higher pension lump sum payments may be available
- An overseas pension can pay benefits in multiple currencies
- A member does not have to purchase an annuity
Upon death, as a member of an overseas scheme, the funds available to beneficiaries may be better than what is available from UK pensions. The benefits of transferring UK pensions overseas are not limited to the above points. However, an individual should be aware that there may also be restrictions or risks when transferring from the UK.
For someone resident in the USA, a transfer to a bdhSterling could cause a taxable event. It is vital, therefore, that an individual receives advice on transferring UK pension pre-migration. Also an individual should be advised on the benefits that they are potentially giving up from their UK pension (particularly if they are a member of a defined benefit pension) before deciding to transfer. Expert advice on transferring UK pensions overseas should be taken to assist in the decision process.