Pensions, 401Ks, etc, etc

Helen, can you answer questions about whether the piddly little investments we have in the US from our employment there should be transferred over and combined with our UK pension funds? We're only looking at about $5000 for all of them combined, which to me means we wouldn't exceed the allowable income and have to pay income tax, but as I think they are taxed as soon as they are released, wouldn't it be difficult to get that portion back again? We don't plan to resettle in the US, and I just want to get all these loose threads combined into a few I can keep track of. To complicate things, my husband isn't a US citizen, so he doesn't file US taxes. Can you please offer any advice?  

Hi there

In accordance with the US / K tax treaty, any retirement income generated in the US whilst resident of US will be exempt from UK taxation provided that:

(1) Contributions made by you or on your behalf to the pension scheme were indeed made before you began your residency in the UK.  

(2) The UK authority has agreed that the pension scheme corresponds to a pension scheme established in the UK.

With regards to point 2, a copy of the pension plan should be sent to the Inland revenue together with a letter explaning your request fo an approval.

Please also be aware that if you include it in your UK pension plan, all the distributions in the UK (when the time comes) will be taxable in the UK.