US SIPPs

The UK pension legislation changed as a result of the March 2017 Budget. Residents of the US who move their UK pensions into a QROPS will now be subject to a 25% overseas transfer charge. However, the option remains to use an international SIPP wherein no overseas transfer charge is levied.

The amount you can take as a lump sum is 25% of the value at the time of withdrawal. Tax treatment might depend on your local tax authority, but our understanding based on advice from our providers is that no tax will be paid on the lump sum if it derives from the SIPP. This is a result of the double tax treaty between the two countries.

Only a limited number of SIPP and Platform providers accept US citizens or US-connected persons.  A select number of UK SIPP providers specialise in UK pension transfers for US citizens abroad. They have done the work, which implies they have made sure their scheme is US-friendly for reporting purposes.

The US SIPP is effectively a UK SIPP that is HMRC-registered and FCA regulated. The SIPP is viewed as a tax-favoured foreign trust, which can be a regulated pension accumulated from past employment. The IRS recently published a document on the reporting requirements. The document highlights conditions/criteria for not having to report the SIPP to the IRS.

It is necessary to recognize that the IRS is an important factor in this equation and that you need to be clear on your obligations under the worldwide reporting requirements. It may be best to have a tax impact assessment from a US tax consultancy on the merits of such a transfer.