PFIC treatment of personal pension holdings

I am a US citizen working in the UK for a company that does not offer a pension scheme. I have already maxed out my Roth IRA contributions in the US so have started looking into establishing a personal pension with an investment firm such as Hargreaves Lansdown.

I am curious what investments I can hold within a UK personal pension without getting into too much trouble with the IRS. Would UK funds held within a pension wrapper be subject to PFIC taxation, as they would be if held in an ordinary account? What about the sort of stuff I already have in my Roth IRA - Vanguard ETFs domiciled in the US? What about if the ETF invests in non-US shares, does that make a difference?

Appreciate any tips!

This sounds like a foreign grantor trust that owns PFICs.  Whether or not US tax is due is moot - it arguably adds Forms 3520A, 3520, FBAR, 8621 (or whatever the HIRE Act version will be), 8938 plus possibly an 8833.

There may be zero US tax; contributing could reduce tax in some circumstances...but it will add dozens of additional pages to your US returns for the rest of your days.  This is not an easy choice.

What if I set up a SIPP, but only invest in US based ETFs - does it still add all that complication?

You probably eliminate the 8621 filing, but the all of rest remain - for ever.  You would also have to be 100% sure you only bought US domiciled ETFs so the SIPP trustee fees would be higher.  You might think of putting a DVA in the SIPP which is what a few folks have done.

It seems so much more complicated for a US person to have a UK pension than for a UK person to have a US pension. Why is this? I thought the tax treaty was supposed to help in this area.

As a US/UK dual citizen in the US it's easy to have 401k etc as there is no UK involvement. And if that person then goes back to the UK the situation is still easy as the 401k/IRA etc wrapper and the treaty keeps the funds untaxed until withdrawal.

Are there classes of UK retirement funds that the IRS treats in a similar way. If a US citizen has a company pension plan does that retirement wrapper ever work to insulate the funds from PFIC regulations.

If you are a US person in the UK invested in a US 401(k) or IRA you'd typically elect annually to claim the benefit of the treaty.  The treaty was, however, not negioated to cover the myriad of informational returns that the IRS require. 

If you would like a better answer then please do get lobbying!

The answer on PFICs is simply unknown as there are no Regulations yet on the changes resulting from the March 2010 HIRE Act.

Thanks, I don't really have a dog in this race as my only UK based retirement vehicle is the basic state pension. I feel sorry for the US people in the UK with the difficulties they have investing and saving for retirement. The paper work load seems to be far more for them than for people with US based accounts who live in either the US or UK.

Thanks, I don't really have a dog in this race as my only UK based retirement vehicle is the basic state pension. I feel sorry for the US people in the UK with the difficulties they have investing and saving for retirement. The paper work load seems to be far more for them than for people with US based accounts who live in either the US or UK.

So it sounds like the answer to my original question is that for a USC in the UK, there is NO appropriate retirement savings scheme.

Disappointing.