QROPS....once and for all, does this work?

US Resident with two Personal Pensions from the UK maturing shortly. I am talking to an IFA in the UK who told me that they do work and sent me a link from HMRC showing the approved Companies they work with in the States and yet looking at pages and pages here on this subject, the IRS do not recoqnize Qrops?

I am very doubtfull that they do work and would like to send him links, backing up my facts. He objected to the fact that I said a lot of Companies were scam artists and stated I just had the wrong one....Would like to clear this up once and for all, so any links and comments that I could send on would be appreciated.

US Resident with two Personal Pensions from the UK maturing shortly. I am talking to an IFA in the UK who told me that they do work and sent me a link from HMRC showing the approved Companies they work with in the States and yet looking at pages and pages here on this subject, the IRS do not recoqnize Qrops?

I am very doubtfull that they do work and would like to send him links, backing up my facts. He objected to the fact that I said a lot of Companies were scam artists and stated I just had the wrong one....Would like to clear this up once and for all, so any links and comments that I could send on would be appreciated.

You cannot transfer UK pensions to US retirement accounts. You can do a QROP into a scheme based outside of the US that is structured to comply with US regulations. These are generally insurance type arrangements. The fees might be high.

Why are you thinking of moving your pensions? As it stands distributions may well be free of UK tax, but will obviously be US taxable. I'd also check into their current status with the IRS as UK personal pensions are tricky and your foreign accounts reporting obligations if you haven't done so already

Thx Nun,

I understand what you are saying............it's just that an IFA in the UK, seems to think that just because HMRC lists US Companies that recoqnize the Qrops scheme, it should be OK with the IRS??
 www.hmrc.gov.uk/pensionschemes/qrops.pdf [nofollow]

Also and as you know, on the Expats Board, everyone simply states..don't do it, it doesn't work, etc, etc.......but from what you state, transferring to outside the States is far too complicated and expensive and not worth doing..so I wanted to get back to the IFA and tell him why everyone says it won't work but with back up links and proof..........
As for me, it obviously makes sense to have the money here in the States and not in the UK, but if I don't have any other viable and economical options then that's what I have to do.......and make sure everything is reported correctly, but will have to deal with exchange rates and transfer charges. Thx and as I said, I would love to send this IFA responses from others why it's not a good idea to get involved with Qrops.

Here is a good summary,

http://www.expattaxandlaw.com/QROP%20cross%20boarder%20retirement.html

Why exactly is your IFA suggesting a QROP.....the transfer will probably be a non taxable event, but any distribution from it will be US taxable. I don't see much advantage. Any 25% tax free lump sum will be US taxable as income and you can find inexpensive ways to transfer the money. Currency fluctuations could be an issue, but they might also be beneficial. If we aren't talking about big bucks I wouldn't worry.

Just for interest what type of personal pensions were these and how have you been dealing with them on your US taxes previously?

I don't believe he is aware of the complications and seems to think if HMRC ok certain Companies, the IRS will as well. These pensions and the lump Tax free sum(if I take them) are not due until June of this year so have not filled out any US tax forms yet.......They are personal unit linked Pensions and are relatively small....approx 31K on one and 28K on the other.

I don't believe he is aware of the complications and seems to think if HMRC ok certain Companies, the IRS will as well. These pensions and the lump Tax free sum(if I take them) are not due until June of this year so have not filled out any US tax forms yet.......They are personal unit linked Pensions and are relatively small....approx 31K on one and 28K on the other.

I don't think the QROP should be your most pressing concern. Have you spoken to a tax professional about the US tax implications of these personal pensions? Best case is that they are covered under the treaty, but they may need foreign trust forms. Also FBAR filing might be necessary and FATCA too.

You seem to have investments in non-US qualified pension plans.

Arguably these are both foreign trusts (invested doubtless in PFICs) and you have failed to file two Forms 3520 for several years. Forms 3520-A should also have been filed and additionally you should have disclosed these annually on your FBARS. For 2011 you will be disclosing these on Form 8938.

It would be pruden to seek professional advice on which of the five possible methods you should use to address these for US tax purposes as your previous returns were incorrect.

It is impossible incidentally to transfer into a US qualified plan from a non-US qualified plan.  You could move the monies into a QROPS in, say, Malta, but this would further complications.

Is your IFA SEC registered? If not, why is he advising a US person?

Why should I have filed all these forms out you suggested when I have had nothing up to date financially to disclose? It's been so far yearly statements showing my plan and an overall amount in that plan at the time..goes up, goes down, but I haven't taken a penny out(as yet) Also, there seems to be a grey area with the IRS as where does it categorically state that these are non-US qualified pension plans as opposed to foreign trusts.......I read on these boards that two IFA's could have completely different answers to this questions?
And lastly, my IFA is not advising me on anything at present, just questioning why I don't pursue the qrops route which he feels is possible and I don't....

Why should I have filed all these forms out you suggested when I have had nothing up to date financially to disclose?

You have to comply with IRS regulations because you are a US resident. The tax deferred status on a UK account has no meaning in the US.

It's been so far yearly statements showing my plan and an overall amount in that plan at the time..goes up, goes down, but I haven't taken a penny out(as yet) Also, there seems to be a grey area with the IRS as where does it categorically state that these are non-US qualified pension plans as opposed to foreign trusts.......I read on these boards that two IFA's could have completely different answers to this questions?
And lastly, my IFA is not advising me on anything at present, just questioning why I don't pursue the qrops route which he feels is possible and I don't....

A US qualified pension plan has to be set up in the US under IRS regulations. There is nothing in IRS regulations that gives you any tax deferral on foreign pensions. To get US tax deferral on your UK pensions you have to apply the US/UK tax treaty. You will need to find out if your UK personal pension plans are covered by the treaty. Your starting point should be that all your foreign accounts are US taxable until you definitively find out otherwise.

Professional tax advisors have different opinions as to how the treaty is applied wrt UK pensions. Most people agree that UK employer sponsored final salary plans are covered, some then take the position that personal pensions are also covered if your employer made more than 50% of the contributions otherwise they are foreign grantor trusts requiring annual reporting of gains and taxation, hence 3520 and possibly PFIC forms. I have seen one professional advisor take the position that personal pensions are covered by the treaty even if the employee made all of the contributions, but it doesn't seem to be the most prevalent position. If you were to take this aggressive last position you should probably file an 8833 and actively claim the treaty exemption and lay out the reasoning.

As you have account values and you say your pensions were "unit linked" and they are over $10k you should definitely be filing FBAR and FATCA may be necessary too depending on the value of your foreign assets and marital status. The "unit-linked" status makes me particularly nervous because of the restriction on US residents and citizens investing in foreign pool investments like unit trusts. I would find a qualified tax professional that can help you.

Thank you Nun, meticulous as ever and I appreciate all your lengthy and well explained replies.........just wish I knew how to find a qualified tax professional for UK/USA and one that comes with references from others?

I'm sorry that your QROPs question opened what might be a "can of worms". But with FBAR, FATCA and the IRS being a lot more vigilant about foreign accounts it's best to be sure you are in compliance.

Pete Newton is US based, dual qualified and gets good reviews on Britishexpats.com
although I have no personal experience of his services.

http://www.britishexpatstax.com/

also Liz Zitzow may be worth contacting, you might find her thoughts on personal pensions useful.

http://www.britishamericantax.com

Excellent..Thank you.

I'll guess that your Unit linked fund pension was taken out in the 80's with a insurance company that may well have sold on the plan to another company or consolidator. A further guess would be that the plan is closed to new business.

If you give your provider a call and ask them to send you a pension investment statement. It's going to show protected and none protected rights, along with other pertinent information such as applicable fees. Additionally this statement will show if your plan is a trust and the U.K legislation, for example if the policy is an approved retirement plan under U.K law.

Might be a good starting point...

Good Points....Barcrest. Thx.....and you are correct on your assumptions...statements are coming, but the other things you mentioned I will ask them. As a matter of interested what are protected rights? I hope it's not a trust and an approved retirement plan, but more importantly, recognized and approved by the IRS!!

In the late '80's, it became possible for individuals to opt out of the government's additional pension, or SERPS, scheme. This opt out was known as Protected Rights. Protected Rights are a type of pension fund. If you get chance read the tax treaty and updates that discuss pension plans. Some bed time reading, but it'll add some clarifycation.