Receiving US pensions in UK

Husband is retiring in a few months and we will be moving from the US to the UK.  He will receive payments from several sources, all within the US:

1) Company defined benefit plan (qualified)
2) Company defined benefit plan (non qualified)
3) NQDC (distributions relating to employee contributions)
3) Social Security
4) 401K rolled over to Traditional IRA
5) ROTH IRA

Is there anything you recommend he should do in preparation for these distributions?

Our understanding is that pensions are taxable only in the country of residence, so he will be taxed only in the UK on each of these payments.  Does this mean that payment needs to be made directly into his UK bank account? If payment is made into his US account and he then transfers the payment using one of the online foreign exchange services like WorldFirst or USForex, would that create complications for the tax treatment of the distributions?

Is your husband a US citizen or Green Card holder?

I urge you to talk to the administrator for each pension/income source about your move and find out their policy wrt withholding and account management for non-US residents.

I can speak only as a US/UK citizen who moved back to the UK and I see from an earlier post of yours that your husband is also a USC.

For me my US private pensions and withdrawals from my IRA are taxable in the UK, but Roth conversions are only taxable in the US

Surprisingly, SS is only taxable in the UK.

Roth withdrawals are tax free in both countries.

I can speak only as a US/UK citizen who moved back to the UK and I see from an earlier post of yours that your husband is also a USC.

For me my US private pensions and withdrawals from my IRA are taxable in the UK, but Roth conversions are only taxable in the US

Surprisingly, SS is only taxable in the UK.

Roth withdrawals are tax free in both countries.

OK so if the husband is a US citizen then US law means that all the pensions that the OP mentions except the ROTH are taxable in the US. If the OP applies the treaty then the SS would become US tax free. So here's a summary for a USC resident in the UK with the treaty applied.

1) Qualified DB pension taxed in UK and US, resourced to UK so you can get FTC
2) Non-qualified DB pension taxed in UK and US, resourced to UK so you can get FTC. I'd ask a professional whether the treaty applies to non-qualified plans and whether HMRC recognizes the tax deferral wrapper.
3) NQDC  taxed in UK and US, resourced to UK so you can get FTC. I'd ask a professional whether the treaty applies to non-qualified plans and whether HMRC recognizes the tax deferral wrapper.
4) SS taxable only in UK
5) IRA withdrawals taxed in UK and US, resourced to UK so you can get FTC
6) ROTH are tax free in both US and the UK.

As you husband is a US citizen the administrators will apply withholding and after UK tax is paid you'll have to file US taxes and get credit for the UK tax and the withholding.

From memory some (but not all) words in the treaty are capable of being interpreted as relevant for non-US qualified plans. That does not mean to say that HMRC & the IRS would take the same view. HMRC may not concur with all of nun's other comments above, because HMRC do not accept the US Treasury Technical Explanation of the treaty as being a valid interpretation. This may need to be resolved through the courts one day.

From memory some (but not all) words in the treaty are capable of being interpreted as relevant for non-US qualified plans. That does not mean to say that HMRC & the IRS would take the same view. HMRC may not concur with all of nun's other comments above, because HMRC do not accept the US Treasury Technical Explanation of the treaty as being a valid interpretation. This may need to be resolved through the courts one day.

Interesting to know as I have a 457.

What would HMRC disagree with in my comments. I've said that they should be paid tax on everything apart from the ROTH.......is that debatable?

Thank you for all the valuable input.  As he will be taxed in both the US and the U.K. does this mean there is no issue with receiving his payments in his US bank account and then remitting the money to the UK? What about Social Security that will be taxed exclusively in the U.K.? Must payments be directly deposited from the Social Security department in his U.K. account?

Thank you for all the valuable input.  As he will be taxed in both the US and the U.K. does this mean there is no issue with receiving his payments in his US bank account and then remitting the money to the UK? What about Social Security that will be taxed exclusively in the U.K.? Must payments be directly deposited from the Social Security department in his U.K. account?

SS payments do not have to be deposited in a UK account, but why wouldn't you? The Fx rate is the best you will get, no bank charges apply, and he will know precisely what to report on his UK self assessment.

As for other payments, they can be deposited in any account you choose. Just remember that income is taxed when received, which may or may not be when remitted.

Thank you for all the valuable input.  As he will be taxed in both the US and the U.K. does this mean there is no issue with receiving his payments in his US bank account and then remitting the money to the UK? What about Social Security that will be taxed exclusively in the U.K.? Must payments be directly deposited from the Social Security department in his U.K. account?

I have 2 private pensions deposited into my US account and periodically move some money to my UK bank. No problem in doing that and the gross amount of those pensions is reported to HMRC, not just any money that is moved over.

My wife will be receiving SS later this year and we plan on having that deposited directly to our UK bank for the reason Vadio gives.

Thank you for all the valuable input.  As he will be taxed in both the US and the U.K. does this mean there is no issue with receiving his payments in his US bank account and then remitting the money to the UK? What about Social Security that will be taxed exclusively in the U.K.? Must payments be directly deposited from the Social Security department in his U.K. account?

Is your husband going to be taxed on a remittance or arising basis?

Taxed this year (2017-18) on RB and thereafter on AB.  He doesn't start receiving social security yet, so will be paying on AB by the time he receives SS.

The only reason for preferring receipt of income into US account first and then transferring funds is that our thought is we would get a better exchange rate through USForex than would be the case if directly deposited by pension plan administrators but we may be wrong.

For me my US private pensions and withdrawals from my IRA are taxable in the UK, but Roth conversions are only taxable in the US.

So no problem to do ROTH conversions as a U.K. resident with UK address? His account would be at Vanguard. I thought I read in another thread that Fidelity does not allow ROTH conversions for residents overseas.

The only reason for preferring receipt of income into US account first and then transferring funds is that our thought is we would get a better exchange rate through USForex than would be the case if directly deposited by pension plan administrators but we may be wrong.

The advantage would be in being able to choose the timing of the transfer with the currency fluctuations, such that they work in your favor.

So no problem to do ROTH conversions as a U.K. resident with UK address? His account would be at Vanguard. I thought I read in another thread that Fidelity does not allow ROTH conversions for residents overseas.

I had heard that about Fidelity as well and since my wife's IRA and Roth were with them we moved her over to Vanguard before we left the USA. My IRA and Roth was already with Vanguard and we also gave each other "agent authorization" over each other's accounts so it is all very simple to see and manage.

Note that I did not confirm that Fidelity do not allow Roth conversions for overseas residents, so that may not actually be the case.

Thanks so much for all your responses. All much clearer now. Just need to check on tax status of the non-qualified pensions and deferred compensation in the U.K.