Re: Foreign Pension Taxes
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Returning Member

Foreign Pension Taxes

I have a foreign pension from UK.  I am now living in the USA and am an American citizen.

 

This pension has not been contibuted to for over a decade and doesn't seem to be able to roll over to the USA. So I have to surrender it and pay the taxes.

 

It is a non qualified pension and I expect it to likely be classed as ALL taxable.  Employer paid in, I never paid in.  The employer payments might have been taxable benefits but unsure how to prove so assume everything is taxable.

 

It will all just count as income and add to my regular income, correct?

 

What I am unsure about is do I have to pay Fica tax on it?  Yes Federal and State tax.  But Fica as well?  

 

I do not believe I need to pay the 10% early withdrawal penalty as I won't be 59.5 for another year...but this is NOT a qualified pension.  It is an IPP. Individual Pension Plan.

 

Fed at applicable tax %.

State at applicable tax %.

No 10% early withdrawal.

 

Fica ???

3 Replies
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Level 11
Level 11

Foreign Pension Taxes

@MMCMAR ,  generally this should not be considered active/self-employed income and therefore there is no FICA/SECA on this.  My question is why do you have to surrender  and get a total distribution and what prevents it from being left in the trust  and distributed as pension  after you are retired ( UK does have a retirement age --no?).  Even if you don't do that  you could still avail yourself of lump-sum total distribution and average  over 10 years once you reach a certain age.  Or are you taking the total distribution for some personal requirements.  

 

I would strongly suggest  you consult a tax professional familiar with international  retirement income and  USA-UK  tax treaty , before you take distribution.

On the other hand if you have already taken the distribution , then perhaps you can answer  my questions and we will find help for you

pk

Highlighted
Returning Member

Foreign Pension Taxes

In the UK you can take your pension at 55.

 

However, this has been put into an international pension by employer after I moved to usa.  And they are all online only. I cant see or access the plan documents.  There is no phone contact and email is difficult to get a response.   This company is not easy to work with so we wanted to roll it over to our USA to be able to work with our advisor...or to our UK one to work with that adviser.

 

Our usa advisor can't access and I don't  know if our uk one can.  We didn't  have any choice or say with this, employer did it....supposedly to make things easier for us but reality is not.

 

Surrendering it and biting the tax bullet may be easier than leaving it.  Hence my questions

Highlighted
Level 11
Level 11

Foreign Pension Taxes

@MMCMAR , while I am not familiar with the details of such schemes, what I get from spending a little time on the web  ( UK govt statement, Wikipedia etc.  ), it looks very similar in character to US IRA  ( including self-directed  IRA -- SIPP in the UK ).  

My impression on reading all I could find on the subject suggests that

(1)   one cannot transfer the UK IRA-equivalent  to a US IRA.  

(2)So given all of the above I  do not find  anything that says  you must  "Crystalize"   just because you are in the USA  just that there is a age limit of 75 ( similar to the US at  70 1/2 ).  

(3) In any case you will be taxed by the USA ( and possibly by the UK ) on any distribution that is beyond  your basis  in the account

4. there is no FICA or the 10% penalty for early withdrawal by the USA - because you did not get any US tax advantaged treatment during contribution

5. there are quite a few firms that deal with these UK pension schemes fro UK expats or US citizens whom earned  this while on the UK.

 

Please consult with some of these firms and/or UK Inland Revenue  ( I suspect  UK consulates in the USA may be able to help ) for information.    In the worst case, you surrender the policy , take total distribution and pay the US taxes   on your world income -- this may have very serious tax consequences. Therefore I again suggest , please consult with tax professional familiar with such issues.

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