Need to transfer a UK pension, now in the US

I don't normally ask for advice myself on the Tax board and am usually giving it.  I am pulling my hair out over a UK pension issue and am running out of ideas.

I very quickly moved back to the US earlier this year.  I received notification in September that I need to move out my UK pension money from my old-employer's scheme or I lose it.  I did check on this before I left and was told it wouldn't be a problem, but here I am.

I have been looking for personal pension products where I can then invest the monies into US mutual funds to avoid US PFIC rules.  However, both stakeholder pensions and SIPPs require UK residency.  I know that HMRC allows you to move funds into QROPS but it is my understanding that the US still doesn't allow the transfer, despite having US vehicles on the QROPS list. I am thinking my only other option is to open a foreign QROPS (like say in Ireland) and hope to invest in US mutual funds.  I don't even know this is possible (both for residency rules and investment options) and I have no idea what companies may be reputable. 

Are there any alternative suggestions out there that I am not thinking of?  I haven't dealt with pension planning in several years now so I feel out of the loop.

I appreciate this is a very specialised question so thanks to anyone who contributes!

I'd double check with your previous employer as keeping the money in their scheme would be the simplest. If you have to move it and stakeholder and SIPPs are not possible then a QROP seems like the way to go. I believe that under the treaty it will not be taxed by the IRS as it isn't taxed by the UK, but you will still have to deal with US and wherever you put the QROP cross border tax issues. It becomes vital what the QROP is invested in. Maybe if you bought something like an annuity you could avoid PFIC.......but I'm just guessing.

Yeah, I definitely can't keep it in, already tried that.  And like I mentioned, I don't think the QROPS is actually an option.  The UK will let you move it out but the US won't let you move it in. 

Yeah, I definitely can't keep it in, already tried that.  And like I mentioned, I don't think the QROPS is actually an option.  The UK will let you move it out but the US won't let you move it in. 

The QROP isn't an option for the US, but you could do it to another country. I believe that the transfer would be US tax free to the same extent that it's tax free in the UK.
If there isn't much in the account it might be easiest to take the distribution and pay the tax on it so you can move the money to an after tax account in the US. Not very tax efficient, but it might be the easiest thing. But there must be QROPS that invest in non PFIC stuff.

You could move it into a QROPs (although not in the US) - you doubtless have basis under 402(b) so all you have to cope with are future 3520 and 3520-A filings plus any State issues. Malta and Guernsey are popular jurisdictions.

You might think about holding the investments in a DVA to reduce US tax reporting a little.

You could move it into a QROPs (although not in the US) - you doubtless have basis under 402(b) so all you have to cope with are future 3520 and 3520-A filings plus any State issues. Malta and Guernsey are popular jurisdictions.

You might think about holding the investments in a DVA to reduce US tax reporting a little.

So it looks like the solution is to pay one of the companies that specializes in QROPs to transfer your pension to a Deferred Variable Annuity. I'd probably choose IOM or the Channel Islands.

However, I think you'll need to do some calculations to see if the cost of the QROP and the fees associated with the annuity are worth it. If the amount in the pension is small it might be best just to cash it out and get the money to the states where you could invest it with a low cost mutual fund company like Vanguard. You loose the tax free compounding, but gain very low fees and liquidity.

You could move it into a QROPs (although not in the US) - you doubtless have basis under 402(b) so all you have to cope with are future 3520 and 3520-A filings plus any State issues. Malta and Guernsey are popular jurisdictions.

You might think about holding the investments in a DVA to reduce US tax reporting a little.

Ugh.  I thought this was my last option.  I was grasping at straws that there was something I hadn't thought of. 

However, I think you'll need to do some calculations to see if the cost of the QROP and the fees associated with the annuity are worth it. If the amount in the pension is small it might be best just to cash it out and get the money to the states where you could invest it with a low cost mutual fund company like Vanguard. You loose the tax free compounding, but gain very low fees and liquidity.

And herein lies part 2 of this problem.  The value isn't crazy high and I will lose most of it in fees.  This is why I was wondering if anyone had done this in practice.

And I don't have an option to cash it out.  999999.999999% is employer contributions so I forfeit if I can't move to another pension vehicle.

Most QROPs require minimum transfers of at least £20k to make it worthwhile. This is another place where the customer is ripped off by the finance industry.