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    Specialist Help For USA Residents

    It is estimate that there are over 1.5 million British expats now living in the USA. A very large proportion of this number will never return to the UK. Choosing to live out their twilight years in sunnier climes.



    The USA is certainly a favourite destination for many UK ex-pats, however transferring a pension into QROPS is problematic for stateside residents as well as ex-pats.

    For the first time some QROPS is now available that tackles the necessary legal and administrative issues that have prevented US residents and nationals from picking up the tax and investment benefits or transferring to a QROPS.

    QROPS advisers do confirm that the HM Revenue and Customs listings of QROPS have included several US 401(k) pension schemes more or less from day one of April 2006. In principle QROPS transfers were available to US nationals living abroad along with UK ex-pats moving to the United States.

    It does remain that the HMRC’s counterpart in the USA namely the Inland Revenue Service (IRS) has so far refused to recognise QROPS transfers into a QROPS USA 401(k) pension by UK ex-pats living there. The reason for this they claim is that the QROPS structure is not legal.

    A similar no-go status was imposed on US nationals overseas who transferred from a 401(k) to a QROPS.

    QROPS 401(k) And IRA Transfers

    Both triggered IRS tax penalties on any funds that were transferred.

    This unfortunately is likely to tighten up further from January 2013 when the Foreign Account Tax Compliant Act comes into force. The Act will virtually bar all US residents and US nationals living outside the country from transferring their pensions into a QROPS.

    Although this complicates any QROPS transfers in or out of a 401(k) pension some providers have managed to re-structure the master trust that manages a QROPS into a USA-friendly legal entity.

    This is a legal alternative that opens QROPS USA investments as a two-way street between transferring from a UK pension to a US QROPS and likewise from a US 401(k) to an offshore QROPS.

    The framework is now in place, however QROPS USA is still tied up in red tape and successful transfers do require patience, specialist skills and expertise.

    The possibility of moving QROPS pension transfers for UK ex-pats living in the US does open a new world of investment opportunities that were once unavailable.

US Residents Can Now Transfer Their UK Pensions To A QROPS!

It is estimate that there are over 1.5 million British expats now living in the USA. A very large proportion of this number will never return to the UK. Choosing to live out their twilight years in sunnier climes.  Since 2006 UK non residents have been able to transfer their UK pensions to a jurisdiction of their choice. Affording them reduced tax rates, higher returns, higher pension income, and many other benefits. However this has not been the case for US residents. To a greater degree this has been caused by the Patriot Act. George W Bush’s legislation to help fight the war on terrorism criticised at the time for ignoring civil liberty concerns. This has had a profound impact in how a US resident can conduct their financial affairs.

The effect of this on a QROPS pension transfer for a US resident has generally lead to the inability to undertake a transfer. If you consult the current HMRC list of registered QROPS providers, you find fourteen listed in the USA. The majority of which are 401k pension plans. However the IRS has indefinitely blocked transfers to these schemes. With the majority of QROPS transfers that have taken place being deemed sham trusts by the IRS, and open to punitive tax penalties. And things will not get better. The HIRE act comes into force in the US 1st Jan 2013. Included in this is The Foreign Account Tax Compliance Act. It is this legislation that will stop 99% of all QROPS Trusts taking on US Nationals outside the US, and also US residents.

For this reason a US resident looking to undertake a UK pension transfer to a QROPS must take great care. Any advice you are given with regard to a pension transfer, must include advice and an explanation of how the QROPS will be treated by the IRS. Be aware that the IRS takes a dim view of any offshore trust.

This said; please note that a UK pension transfer to a QROPS can be undertaken by a US resident. This has been the case from day one. The problem has always been the way that the QROPS trusts have been structured. The trusts have been constructed to accept any transfer, other than one from a US resident. The Patriot act also caused QROPS trusts a conflict with regard to the data protection act, and the additional reporting requirements required in the US.

What was required was to construct the QROPS trust specifically with US residents in mind. Over the last twelve months QROPS providers have come to realise that they are missing out on a vast potential market, and have now constructed QROPS trusts that are IRS friendly. However there are very few financial advisers who have access to these QROPS providers, and even fewer who are qualified or have the experience to deal in this market. Care must be taken to ensure that you consult a firm who is fully conversant in this field.

A QROPS transfer undoubtedly is of great benefit to anyone who is eligible to do so. Particularly given the latest wave of pension reforms proposed by the UK coalition government. Which include measures to allow Final Salary (Defined Benefit) pension scheme trustees, to reduce transfer values at their discretion? Anyone who has even toyed with the idea of transferring their UK pension, or did not know they could, needs to seriously consider taking action sooner rather than later.

For more information, visit the HMRC website here.