Well, Stan reckons this hasn't been discussed before, so here goes 😀
Back in the early 1990s I worked in the US for a few years and part of the package was a pension contribution. To be honest I'd forgotten about it and assumed that it would have dwindled to nothing in one of the crashes. But I just managed to access the account again and it looks as though there is a bit in there. Not life changing amounts (tens of thousands rather than hundreds) but enough that it could possible change my calculation on when to retire by a year or two.
Obviously I'll need to get some proper financial advice when the time comes, but just trying to get a ball park idea on how much the pot might actually be worth once I transfer it over here and presumably pay tax on it (here there or both). So, just wondering if anybody has done this before and what the best approach might be.
Technically it's in a 403b plan, but that apparently behaves like a 401k for all intents and purposes.
If its like my Swiss one you may have to pay tax on it as its counted as income not a pension.
I moved a pension back from Australia, although actually not as a pension because Aus doesn't have the reciprocal QROPS pension to be to move within the tax wrapper. It looks like the USA is same, so yes be prepared for lots of tax hits.
At the time I left Aus, I converted the pension to cash (was an option because I only had 2 years' service) and paid the tax bill at the Australia end, and then just moved the cash back (and invested in pension here, with tax uplift as I was employed in UK again).
So you need to ask the US provider if there is any way to transfer it without it being a 'withdrawal' to cash - and therefore also having withdrawal fees applied.
My wife cashed in a small US pension a while back. From memory, the IRS took their 30%, then it was treated as income here. So you do get clobbered by tax.
We had no AI back then, though - which suggests you could reduce the tax...
- However, the US-UK tax treaty can reduce this — often to 0% or 15% depending on the type of pension
- You'd need to file IRS Form W-8BEN to claim treaty benefits
From memory, the IRS took their 30%, then it was treated as income here. So you do get clobbered by tax
but if you paid it into a UK pension would you not get the UK tax (but not any NI) back?
Thanks folks. It sounds as though I can't avoid paying tax on it somewhere (fair enough) but might be able to avoid paying tax on it twice. Probably need to engage the services of an expert to be sure on that though.
I'm thinking of using it as "income" rather than paying it into a UK pension. So paying UK tax on it seems fair enough.
Despite being in my 60s I haven't really given retirement much thought (beyond ensuring I had a decent pension) until now. I guess I just kind of assumed I'd work until 67 as that's the state retirement age but haven't been in any rush. I'm an academic and for most of my career that's basically meant being paid to indulge my own curiosity. Don't get me wrong. The pressure to deliver results has always been there and you are always being judged by your peers. That just comes with the territory. But, until recently, as long as you were delivering according to some agreed metrics you'd basically be left in peace. But academia, like all professions it seems, has become a less enjoyable place to work recently, which has prompted me to actually look at some of the pension calculators. It seems that the added value of working those last few years (in terms of what it does to your annual pension) is quite low and maybe not worth as much as a few years extra healthy retirement. Obviously the state pension doesn't kick in until 67, but if this US pot (that I'd forgotten about) would provide the equivalent of a few years state pension I guess that would mean that I could go a few years earlier. I probably wont but knowing that I could just walk away if working conditions deteriorate any further would no doubt give a certain sense of freedom.
