Pension in the UK

Hopefully I've posted this in the right place.

I am a US citizen working in the UK, and have the opportunity to participate in my employer's stakeholder pension scheme (I contribute 4% and they contribute 8%)

Is it a good idea for me to participate? I don't think I would be able to transfer the money to a US account and that it would have to stay in the UK. At this point in time the plan is to return to the US (and more then likely retire there) which means 2-5 years worth of contributions from time working in the UK.

Does anyone have experience participating in their employers pension? Is it a good idea to join?  Also I would have the option to divert Second State Pension funds there as well, is this something I should do? What tax issues do I need to be aware of?

All in all I'm debating if it would just be better for me to just open an IRA in the states and set aside the 4% I would've given to the pension.

Also, now that I'm thinking about it what happens to my NI contributions when I return to the States?

Thanks for your help.

Hiya

From what you've said there, I'd advise that you speak to independant financial advisors who have experience dealing with people in both countries and working out the best plan of action based on your personal circumstances and requirements.

The simple answer is yes you can join, the difficulty arises in what and where the tax implications would be, when and how you can access the money, costs of getting correct information relevant to your scenario etc etc.

Get independant advice on this to ensure you get the best course of action.

cheers, DtM! West London & Slough UK!

caprikore,
I am currently debating the same thing!  I plan to be in the UK for 2-5 years, and I'd love to take advantage of the company matching pension offering, but am worried that in the long run, I won't be able to access the pension money from the US or that it will damage my ability to use 401K or Soc Security money at a later (MUCH!) date. 
Did you speak to a tax advisor or get any good information you can share?
THanks.

I'm in the same boat here!  Does anyone know a good financial adviser who understands the impacts of contributing to and eventually moving UK pension money back to the USA?  Please send contact details if so.

Thanks!

I'm not much good in the advice department, because I had a tax accountant say "It's your money, no matter what country it's in, so go for it"
So I did.  Will it screw me in the future? Maybe. Maybe not. I didn't bother to think it through, but I wanted to make sure that I have money saved for retirement and the best way for me is through 401(k) and/or pension plans, as I am crap otherwise at saving!

This all varies depending on the rules of the scheme you join, but for final salary pension scheme I am in through my work, because I am contributing on a pre-tax basis, if I do not stay for at least two years, I lose all of my money that I contribute and cannot transfer the pension elsewhere.  Once I reach two years, I can leave the pension in place through the same scheme until retirement (though if I only stay two years, the payout would be a VERY small annual amount and it has been recommended that I keep a UK bank account open if possible to make things less complicated).  I was sent a list of Qualifying Recognised Overseas Pension Schemes that I can also transfer the money to once past the two year mark--there are about 12 or 13 options for the US,the most recognizable of which seem to be Fidelity's 401K plan and a Citibank IRA.

What I have not yet researched, however, are the tax implications in all of this.  I will need to find out more before deciding whether it is best to keep the money in the UK or transfer to the US.  

In a nutshell:

1. A UK plan is not a US qualifying plan.
2. You can NEVER transfer from a UK plan into a US qualifying plan.  [None of the QROPS listed by HMRC will actually accept money even though HMRC would not object.]
3. A UK plan will require MANDATORY annual US reporting. Depending on the plan and your opinion of US law and the tax treaty it may need to be be reported on your income tax return, your FBAR, a 3520, a 3520-A and a Form 8938.  
4. There may be current income to be reflected on your annual income tax return.
5. There may be penalty taxes to pay under IR code section 409A.
6. You may (or may not again depending on the plan and your view of US law) suffer PFIC taxes and PFIC reporting (the HIRE Act signed by the President on 18 March 2010 imposes more of this than before and adds an additional $10,000 per violation penalty).

Congress writes the laws, I just try and learn them!  Do not blame me for the complexity please!

From a financial point of view I'd get into the pension........8% of salary on a pre tax basis is a lot to give up. However, your tax reporting is going to get more complicated. But if you are a US citizen living abroad it's never easy anyway.

I'm a UK/US dual citizen living in the US and all my retirement funds are in US based accounts. This will causes some inconvenience when I retire back to the UK, but if I hadn't used the retirement saving opportunities available to me I wouldn't be in a position to retire now. So bit the bullet, start saving and find a dual qualified tax person to help you file. You might also look into ways you can contribute to a ROTH and if you have any money in UK ISAs or other investments it's definitely advisable to seek some professional help.

As a UK/US dual citizen living in the US I feel very sorry for Americans abroad. I've never filed a UK tax return as I have no assets in the UK and the UK taxes based on residence, not on citizenship as the US does. From a financial and taxation stand point it's far easier for a UK citizen to work in the US than a US citizen to work in the UK. If the congress gets serious about tax reform I'd suggest that they start taxing on residence like every other country, but somehow I don't see it happening, that would be either too sensible or too radical, take your pick.

What would you do if you've been contributing to UK pensions for a number of years and never provided the contributions or gains or whatever it is the IRS wants on any tax returns?
Would you go back - potentially 7 or 8 years in my case - and amend all the tax returns?

Thanks,
Matt

This all varies depending on the rules of the scheme you join, but for final salary pension scheme I am in through my work, because I am contributing on a pre-tax basis, if I do not stay for at least two years, I lose all of my money that I contribute and cannot transfer the pension elsewhere.

That doesn't sound quite right to me.

'If a member leaves with at least 3 months service (but without 2 years qualifying service) he/she can choose whether to take a cash transfer sum or a refund of contributions.'

I was participating in an occupational pension scheme (i.e. pre-tax contributions). I was made redundant from my job less than a year later and had two options (and 6 months to decide):

1) take a payout of ONLY my contributions and pay tax on them, or
2) transfer my pension into a personal stakeholder (or another employer sponsored) pension. I lost my employer's contributions, but was able to keep my own plus any increase in value of my investments.

The difference between options 1 and 2 was more than x3, so I went with option 2. Took forever to do (as most things involving finance do here), but went through eventually with no losses/adverse effects. Am now contributing using my income (after tax) which gets topped up by the government in the form of tax relief.

I don't know if this varies by employer, etc. but I don't think there's any way you can be prevented from getting your contributions back in some form or another.

Search the web for 'pensions early leavers' for more details.

http://www.sackers.com/page.aspx?pointerid=e5a0844aaafa426abb5e456da85b5af8

That doesn't sound quite right to me.

'If a member leaves with at least 3 months service (but without 2 years qualifying service) he/she can choose whether to take a cash transfer sum or a refund of contributions.'

Thanks for the info. My employer insists they won't give me my contributions back because of the pre-tax thing. It does sound completely off to me but now that I have been told my time on maternity leave will push me over the two-year mark, I haven't pursued finding out anything further. Looking back, had I known we were likely to move back to the US so soon, I would have probably not signed up at all.