US tax status of UK pension - depends on 50% contribution?

First post here on the forum! (after reading many posts)

This article is quoted and used as a reputable source in several posts on pensions in this forum:

http://www.buzzacott.co.uk/insights/how-us-citizens-can-make-the-most-of-uk-pensions-changes/34 [nofollow]

My specific question is about this statement in the article:

"When is a pension not a pension?

Provided employer contributions to a UK employer plan represent at least 50% of total contributions, then investment growth within the pension is protected from UK and US tax until withdrawn. This is under the terms of the UK/US double tax treaty and there are no additional reporting requirements."

I searched the text of the UK/US tax treaty for "50" and "50%" and "half" (even outside the important articles 3 and 18 that are relevant for pensions) and found no reference to this.

Can anyone tell me the source for where this differentiation of whether you contribute more or less than 50% to your UK employer pension comes from in the actual tax law? ie, where did this article get its info from?

Thanks!

I must say that even though I have provided expert witness evidence in High Court hearings on the treatment of US and UK pension plans, I have no idea. I also have no idea how they measure this 50% number, particularly where there is salary sacrifice or now that AE has just started.  Perhaps they have a Private Letter Ruling (PLR) on this point from the IRS that no-one else has seen?

I have looked into this extensively and to the best of my knowledge, no one who cites the 50% figure (and there are plenty of mentions of it across the web) has ever provided a source to back up what they are saying. It sounds like it's one of those things that one person started saying and everyone else started repeating until it acquired a life of its own. If there is in fact a source, by all means someone jump in and correct me, but I haven't seen one.

FWIW, the Exchange of Notes supplementing the US-UK tax treaty states clearly that personal pensions are covered under the treaty, at least as far as income within the pension not being subject to tax until withdrawn.

I'm not a professional but I would trust that document in the absence of any other more reputable source.

I've seen the 50% thing from the link quoted, but other professionals don't agree with it and I've never seen a case study with worked numbers. So you pay your professional and take your chances. It's actually sometimes better not even to apply the treaty..... the rabbit hole is deep.

Very interesting, thanks for the replies everyone. A bit scary how quickly anything that sounds nice to the ears is taken as fact.

politicfool, thanks for the link to exchange of notes, I hadn't seen that. The treaty always seems to say employer/personal plans are "qualified" as long as they count "for the purposes of Chapter ...... of the Income and Corporation Taxes Act of 1988", which as far as I read technically only applies to pension schemes approved by some mysterious board, which seems a bit of a confusing joke given how many plans there are. People seems to invoke this (and not) for their plan fairly often though, so a wild, wild west of interpretations.

Sigh..