If you’ve worked in the UK, you may have accrued different types of pension schemes.
Most plans provide a foundation for retirement savings, yet, they often lack the flexibility needed for expatriates, particularly those relocating to the United States.
Managing pensions across borders introduces complexities, such as differing tax treatments, investment restrictions, and regulatory hurdles.
This guide explains how Expat SIPPs or more commonly known as International SIPPs are the better UK based pension vehicle, how they are taxed, the risks, and whether transferring to a US retirement account is a viable option.
Learn how to navigate compliance issues, currency risks, and reporting requirements to protect your retirement savings.
For many UK pension holders living in the US, an international SIPP (Self-Invested Personal Pension) offers the most adaptable solution.
Unlike traditional pension schemes, such as Defined Benefit (DB) schemes, Money Purchase Occupational Pension Schemes (OPS), Small Self-Administered Schemes (SSAS), Personal Pension Plans (PPP), and Stakeholder Pension Plans (SPP). an international SIPP allows greater investment choice and more efficient cross-border management.
However, ensuring tax compliance and optimising retirement savings require professional financial advice, something that can be especially challenging for expats.
The US and UK operate under distinct financial regulations, and most financial advisors are only licensed to provide advice in one jurisdiction. UK-based advisors typically lack the authorisation to offer guidance on US financial matters, while US-based advisors often do not maintain agreements with UK pension providers.
SIPPs are flexible, tax-advantaged pension plans that allow individuals to control their own investments.
However, once you become a US tax resident, managing your SIPP can become more complicated.
A Self-Invested Personal Pension, is a UK-based retirement savings account that allows individuals greater control over their investments compared to traditional pension plans.
Anyone who has worked in the UK, regardless of their nationality, can still open a SIPP.
However, for those living in the US, SIPPs can present unique challenges related to taxation, investment restrictions, and currency risk.
Unlike traditional UK-based pensions, the “expat” SIPP provides more flexibility and control over your retirement savings while accommodating the complexities of cross-border financial planning. Some key benefits include:
If you’ve moved to the US, or are already established there as an expat, you might be wondering:
The rest of our article on expat SIPPs will present you with the answers to these questions.
While SIPPs offer investment flexibility and tax benefits in the UK, they present several challenges for expats in the US, including:
Failing to address these challenges could lead to unexpected tax bills, investment restrictions, compliance risks, and potential shortfalls in retirement savings.
Some expats only learn of these issues after they’ve already made costly mistakes, so it’s important to plan ahead.
If you live in the US or a planning a move there, you should consider following these 5 steps to effectively manage your expat SIPP:
SIPPs are not treated the same as 401(k)s or IRAs, in that they are not recognised as tax-advantaged accounts.
Contributions made to a SIPP while as a US resident will not receive US tax benefits. Moreover, income and gains within a SIPP may be subject to US taxation in the year they are realised, even if they are not withdrawn.
This differs from the UK, where such income and gains are typically tax-deferred until withdrawal.
Taxation of withdrawals, as well, may depend on how the IRS classifies your SIPP.
For all these reasons, it can be beneficial to speak with a cross-border tax specialist and cross-border financial advisor.
Many UK-based SIPP providers restrict accounts for US residents due to compliance concerns.
Some providers may even force expats to liquidate holdings, which can trigger unexpected tax consequences.
If your SIPP provider no longer supports US clients, you may need to switch to an expat-friendly provider.
As wealth managers at Private Client Consultancy, we work with a variety of expat SIPP providers if you are concerned about your SIPP while living abroad.
Keeping a pension in GBP while living in the US means exposure to exchange rate fluctuations.
In order to hedge against currency risk, some expats choose to invest in USD-denominated assets within their SIPP. Some SIPP providers may offer investment options in USD-denominated assets to mitigate this risk.
Again, we invite you to reach out to a wealth manager at Private Client Consultancy as we’re here to help you make the most of the best provider for your specific situation!
Some expats consider transferring their SIPP to a US retirement account for simplicity.
However, the transfer process itself is complex, especially because direct rollovers are generally not possible.
Options like moving to a Qualifying Recognised Overseas Pension Scheme (QROPS) may be limited, since the US does not have recognised QROPS providers and that UK authorities will levy a 25% transfer fee charge.
Withdrawing funds from a SIPP and reinvesting them in the US can trigger UK and US tax liabilities.
Your future plans matter and could impact your decision. Ask yourself:
“Do I expect to live and work in the US for a few years before returning to the UK, or is my move a permanent one?”
Speaking with an advisor about your plans and goals could help you avoid unintended tax consequences.
You can also ready more about the difference between QROPS and SIPPS here.
If you have worked in the UK and are now in the US, and you have foreign financial accounts, you must comply with strict reporting requirements:
Ensuring compliance by working alongside a trusted advisor could help you avoid errors that result in significant penalties
Managing a SIPP from the US can be challenging due to regulatory complexities and the limited number of financial advisors who specialise in both UK and US pension rules. Some of the key obstacles we often heard about include:
Given these challenges, it’s vital for those with a UK based pension scheme who are moving US to seek guidance from advisors experienced in international pension management. We at Private Client Consultancy can help you with this.
For UK pension holders moving to the United States, we recommend having your pension structured in a SIPP.
Once this is set up, managing a SIPP requires careful planning to navigate tax implications, investment limitations, and regulatory hurdles.
While an International SIPP offers significant advantages in flexibility and consolidation, ensuring compliance with both UK and US tax laws is critical. This is why, working with a financial advisor who specialises in cross-border pension management can help you avoid costly mistakes and optimise your retirement savings strategy.
Reach out to Private Client Consultancy today to schedule a complimentary call with a wealth manager to ensure wealth with peace of mind.
Disclaimer: Tax laws, rates, and reliefs are subject to change and may vary depending on individual circumstances and residency status. Any information provided on this website is based on our understanding of current regulations (or the date of when the content was published) and should not be considered personalised financial or tax advice. As tax obligations can differ across regions, countries and evolve over time, we strongly recommend seeking professional advice tailored to your specific situation before making any financial decisions.
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