2016 Autumn Statement - Foreign pensions

A reference was made by the Chancellor in the Autumn Statement concerning foreign pensions:

"The tax treatment of foreign pensions will be more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones."

Item 5.6
https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016#tax-1

Initial conversations indicated an alignment of pensions such as QROPS are the primary target (loss of the 10% tax free element). Has anyone been able to confirm the results for, say, a US SS pension paid to a UK resident? Will they, and other US pension payments, or EU/elsewhere company pensions paid to a UK resident, remain subject to the 10% tax free amount? Or, will they be taxed on 100% of the amount paid to the UK resident?

http://www.pensionsage.com/pa/Foreign-pensions-taxation-to-more-closely-align-with-UK-pensions-tax-system.php

http://www.frankhirth.com/pensions/#.WELqDJV759A

Something to watch, for sure. What's the timing on this? Or do we know yet?

Something to watch, for sure. What's the timing on this? Or do we know yet?

Hi vadio,

No, I don't think there is any timing as of yet. According to the Frank Hirth link, "We anticipate that draft legislation will be published on 5 December which should provide further detail." I would imagine this may become a part of a future Finance Act (2017 or 18?), but the question remains as to which foreign pensions exactly are involved (specific ones or all).

This post is simply a book mark to attempt to keep track if anything does come up. Until then, I suppose we should enjoy what we have. Aside from those who may have their UK tax increased, it's mainly to forewarn those going thru the financial aspects of retirement planning.

I've never been sure why our US SSA (for example) only has taxation on 90%. It's not a recent thing and was there 10 years ago. The assumption is it's an enticement for everyone to report***. With all the recent global reporting initiatives plus the increased bank reporting, perhaps a monetary reward for reporting is no longer needed, to be replaced by the threat of "we know from where and what you're receiving". Oh well, if it would happen, it will increase the amount of our excess FTCs on a US return.

Anyway, it's still maybe. Cross all those fingers and toes.

***If anyone knows the exact reason, could you let us know?   

On 5th December HMRC published draft clauses and related explanatory notes for the Finance Bill 2017. These included, in Schedule 3, densely worded provisions relating to overseas pensions. The background note from HMRC confirmed that the changes included-
•   Taxing the full amount of foreign pensions, instead of 90%.
•   Taxing foreign pension lump sums paid to UK residents that are not already liable to UK tax.

On 5th December HMRC published draft clauses and related explanatory notes for the Finance Bill 2017. These included, in Schedule 3, densely worded provisions relating to overseas pensions. The background note from HMRC confirmed that the changes included-
•   Taxing the full amount of foreign pensions, instead of 90%.
•   Taxing foreign pension lump sums paid to UK residents that are not already liable to UK tax.

Thanks for this, Dunedin. I've located the above Schedule 3 (Part 4 (12)).

•   Taxing the full amount of foreign pensions, instead of 90%.

 

The long (proposed law) version can be found here starting on page 116:

[Part 4, line 12 (1)] (page 122)
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/574680/newbook_book.pdf

The readable explanation can be found in this document starting on page 58:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/575085/OLD_29112016_links_etc-011216.pdf

Relevant is page 60.

"Proposed revisions

Legislation will be introduced in Finance Bill 2017 so that:

 - where a foreign pension or lump sum is paid to a UK resident, 100% of the pension arising will be chargeable to UK tax (to the same extent as if they had been paid from a registered pension scheme)"

"The measure will have effect on and after 6 April 2017." (page 59)

A great deal of discussion aimed at particular types of 'offshore pensions' (my definition), but containing broad statements as found above indicating the new rules apply to all foreign pensions. Still somewhat confusing.