US reporting for UK stakeholder pension and options?

I'll keep this short:
UK citizen, US taxpayer since 2007 and forever more. Currently US resident. 25 years from retirement.

UK stakeholder pension, started in 2002, only ever contributing personal post-tax funds. I can no longer contribute to it. I report it on my 8938 & FBAR. There is an investment fund within the stakeholder pension (a PFIC).

Two questions:
How should I be reporting this right now?

• Make a treaty claim under Article 18 and do nothing [and pay income tax on withdrawal at retirement].
• or Tax it on a MTM basis yearly (via a 8621 PFIC form) so that it is tax-free on retirement
• and/or submit forms 3520 and 3520-A

What should I do with this in the future?

• Nothing.
• Move it to a SIPP where I have better investment options, avoid PFIC investments, and can easily compute income and capital gains annually.

I realize that these questions can have different answers depending on who you talk to, but wondering if there is any fresh 2016 thinking?

Thanks!

Well - you can't mark it to market as it (the PFIC within it more exactly) is not traded on a recognised exchange.

Which Article 18 Treaty claim are you thinking of - presumably one to defer the income from current US income taxation?

Have you thought about NIIT incidentally?

The new 2016 thinking is sadly even greater uncertainty than the past, now that the UK allows for flexi-access drawdown and UFLPS from UK registered schemes.

Well - you can't mark it to market as it (the PFIC within it more exactly) is not traded on a recognised exchange.

The fund is listed on the London Stock Exchange website. (This is it here: http://bit.ly/28LsfLL [nofollow] ). I don't know if this counts as being traded. If not, are there any other ways to pay annual tax based on growth to raise the basis?

Which Article 18 Treaty claim are you thinking of

Yes - the treaty claim that relates to pensions. However, I do suspect that a 100% self-contributed stakeholder pension would be a Foreign Non-Grantor Trust.

Have you thought about NIIT incidentally?

No, but as it is a while before I would draw any income, is Net Investment Income Tax relevant right now?

If 1) my stakeholder pension is a foreign non-grantor trust, 2) holds a PFIC that is not tradeable, looks like the 'best' solution might be to transfer the funds to a SIPP, pay the PFIC tax on the gain (40%-50% ) and re-invest in US domiciled funds or stocks.

The question then remains is if it is possible to structure the SIPP to be recognised as a foreign pension by the IRS and thus avoid the annual informational filings - and also to defer the tax.

Or just sit tight, file my PFIC and 3520 forms and hope that in the next 20 years US/UK get better at clarifying what is and what isn't a pension. Stakeholder pension/SIPP is much like an IRA after all.

So having done some more thinking about it last night, as well as looking into the grey area some UK pensions seem to fall into despite the tax treaty, the route I am leaning towards is:

• Continue to declare the Stakeholder pension on 8938 and FBAR
• Start filing an 8833 every year stating that I am claiming tax treaty exemption for this pension account (i.e. no PFIC form 8931 or foreign grantor trust 3520)
• Keep the stakeholder pension as-is (PFIC and all) and trust that sometime in the next 20 years the IRS catches up with clarifying that this really is a pension.