SIPP vs Leaving a UK Pension in Place for US Residents

A US resident should only move a UK pension to a SIPP after comparing the existing pension with the proposed SIPP and reviewing the US-UK planning position.

A review should usually consider:

• whether the pension is defined contribution or defined benefit
• whether safeguarded benefits apply
• whether valuable guarantees exist
• whether a transfer is available
• whether UK regulated transfer advice is required
• whether the current provider can support a US resident
• whether the SIPP provider can accept a US resident
• whether the SIPP investment range is suitable for a US resident
• whether costs would increase or decrease
• whether investment control would improve
• whether pension access would improve
• whether drawdown flexibility is needed
• whether the existing pension already meets the client’s needs
• whether the transfer creates US tax issues
• whether the transfer creates UK tax issues
• whether treaty treatment is relevant
• whether the pension currency matches future spending
• whether beneficiaries are up to date
• whether the client expects to retire in the US, UK or elsewhere

A SIPP can be useful in the right circumstances.

It can also be unnecessary, expensive or unsuitable in the wrong circumstances.

The decision should be based on evidence, not on the assumption that a SIPP is automatically better than an old workplace pension.

A SIPP may be worth reviewing where you want:

• more investment control
• a wider fund range
• clearer online access
• pension consolidation
• drawdown flexibility
• better beneficiary planning
• a more coherent retirement strategy
• more transparent charges
• improved currency planning
• one place to manage multiple old pensions

But leaving the pension in place may be better where the existing arrangement has:

• valuable guarantees
• defined benefit income
• safeguarded benefits
• guaranteed annuity rates
• protected tax-free cash
• protected pension age
• low fees
• suitable investment options
• better scheme protections
• strong employer scheme terms
• no clear benefit from moving

For US residents, there is another layer.

The SIPP provider must be willing to accept a US resident.

The investment options should be suitable for a US-connected person.

The tax and treaty position should be reviewed.

The pension should fit the wider retirement plan.

The right comparison is not:

SIPP good, old pension bad.

The right comparison is:

Which structure gives the best outcome after guarantees, costs, tax, investments, access, currency and retirement objectives are all considered?

This page is for general information only and does not constitute personalised financial, tax, legal, investment, pension transfer, retirement, estate planning, immigration, UK pension, US tax, UK tax, treaty or currency advice.

UK pensions, SIPPs, defined contribution pensions, defined benefit pensions, safeguarded benefits, pension transfers, consolidation, drawdown, lump sums, US tax, UK tax, treaty treatment, reporting, foreign tax credits, investment options, charges, beneficiaries, currency and future residence depend on personal circumstances and may change.

Pension transfer advice, where required, should be taken from a suitably authorised pension transfer specialist. US tax advice should be taken from a suitably qualified US tax adviser or CPA. UK tax and legal advice should also be taken where relevant.

Financial planning should be coordinated with legal, tax, pension, investment and estate planning advice where appropriate.

Investing involves risk. Pension, retirement account and investment values can fall as well as rise, and you may get back less than you invest.

Currency movements can affect the value of pensions, transfers, withdrawals and income.