dual citizen pension planning advisor?

I'm losing out on the tax benefits of saving for retirement and need a referral to an advisor and or any tips & thoughts from the Forum.

I'm dual US/UK citizen (domiciled US, UK resident) and need to figure out how best to structure my pensions savings - I'm a higher rate taxpayer in the UK, but my only pension savings right now is a US 401k with my current employer.  I make contributions to my 401k every month (employer contributes nothing), but this is using after-tax income in the UK, so I don't get any benefit here.

It must make more sense to set up a UK stakeholder or personal pension to get the tax benefits here, but I don't know what the tax implications of that would be for the US.   Or, is it possible to claim a deduction on my UK tax return for contributions made to a US 401k plan??

I would love a referral to a good advisor who is familiar with these issues, in addition to any thoughts/tips from the forum.

Thanks in advance!

Are your 401k contributions US tax deferred?

I think there are 2 ways you can attack this. The tax treaty will allow you to defer taxes on your 401k contributions in the UK as well.....or you can pay UK tax on your 401k contributions and they should be UK tax free when you take them out.

If you get a UK pension and defer UK tax you can can either use the treaty to defer US tax on the contributions or pay the US tax upfront and use tax credits to offset US tax. The upshot of that will be reduced US tax on the contributions and they'll be US tax free on withdrawal.

Also remember that ROTH withdrawals are tax free in US and UK which might be useful for your planning.

This is a complicated area so I'd recommend you see a professional like

britishamericantax.com

or

towertax.com

or one of the big accounting firms that deals with expats and cross border issues.

Regarding UK tax relief on contributions:

http://www.hmrc.gov.uk/pensionschemes/newsletter24.htm
(item 3)

http://www.hmrc.gov.uk/pensionschemes/uk-usa-tax.pdf
(from item 3 above)

http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM00500600.htm


Note: This is for 2006/07. Things may have changed.

Thanks for the helpful replies.. to nun, yes my 401k contributions are US-tax deferred, but I have paid UK tax on them.

And thanks for the pointers to the experts!

I concur this is very tricky and a professional is a great idea.

nun has mentioned two excellent firms - both of which are one-person businesses where the owner is an US Enrolled Agent (the oldest tax qualification in the world, dating back in origins to the American Civil War).  Neither of these owners are UK qualified or able to provide financial advice as neither are FSA registered.  In other words finding an expert qualified on both sides of the Atlantic who can advise fully on both sets of tax rules and on also the investment products is truly difficult.

nun is amazing in knowledge and self-educated; I'd equally suggest taking time to learn what you can about the rules so you know what questions to ask.