Consolidating into a SIPP - is it wise?

Hi fellow Yankees,
I have two UK pensions from prior employment - I've realised the fees are too high, and I want to consolidate into a lower fee pension fund. Looking around, I identified Interactive Investor offering a SIPP with flat fee that would save me hundreds per year, so I applied to open an account, they've demanded the W9 form for my USC before going further.

That got me wondering about possible tax issues (or tax return issues) that arise from a SIPP. As usual the answer seems clear as mud! This forum archive has been helpful but the scattering of opinions and information across the years has left me... confused.

Essentially my question is: as a dual citizen, should I transfer into a SIPP? or is it better to stick with a standard managed fund?

Note that I no longer pay into these pensions as I'm now employed overseas, they were both over 50% employer contributions, and at the moment I only report the pensions on my FBAR no other forms.

Any advice appreciated friends.

I’m pretty sure SIPPs are covered by the same pension wrapper that employer pension schemes are so I don’t believe the IRS is going to tax any income from them until distribution time.

As you say, they still need reporting if the balances are high enough.

Thank you that's helpful to know.
I had wondered whether in a SIPP I was effectively choosing investments I might encounter the PFIC issues, and be limited to reporting funds etc etc.

Incidentally if its any consolation to anyone, the Australian US tax treaty is even more problematic than the UK-US treaty. Ialso have an Australian pension (superannuation) which apparently are not covered in their tax treaty at all, and a self managed pension in Australia is considered a foreign grantor trust soI have been advised to definitely not get one in Australia.

Managing tax across three jurisdictions, the path to renunciation looks more and more necessary unfortunately.

Currently the existing plans will be reported on both FBARs and (if the filing threshold is reached) Form 8938. Transfers are naturally reported at Line 5 of Form 1040 with a claim under the treaty that the transfers are exempt from US Federal tax.

Once the investments are held in a SIPP, the protection from foreign grantor trust reporting offered by Section 402(b) falls away, so you will naturally want to budget for the additional annual time consuming nuisance of preparing and filing IRS Form 3520 and substitute 3520-A. 

Be mindful that you need to complete the transfer within 60 days, or the amount is not tax free, (line 5 of 1040). Best to have a direct rollover of your employment plan and not to have any proceeds come to you first. Often payment to you is not allowed under HMRC rules, but just be careful you're not caught out.

Sleeping dogs comes to mind...

Be mindful that you need to complete the transfer within 60 days, or the amount is not tax free, (line 5 of 1040). Best to have a direct rollover of your employment plan and not to have any proceeds come to you first. Often payment to you is not allowed under HMRC rules, but just be careful you're not caught out.

Sleeping dogs comes to mind...

Great point. Over 10 years ago when I consolidated and rolled over my 401k to an IRA at Vanguard my 401k provider could only issue a paper check sent to my address on record. Working with Vanguard I got the 401k provider to make out the check to Vanguard rather than myself, with my new IRA account number in the memo field. On receipt of the check I then had to FedEx it to Vanguard but it was still nerve racking at the time while a huge paper check to the value of all my 20 years of 401k contributions was being transported around the country.

This last week my daughter, here in England, received a paper check for over $100k and asked me how best to deposit it. She also has a Vanguard USA account and these days, using the Vanguard app, you can do a mobile check deposit of up to $500k. She had to switch Apple store to the US to get the app but it has saved having to send the check transatlantic. (Apologies for diverting the thread topic a little)

Thanks all for the replies and advice. Extremely helpful as always on this forum.