Can I transfer UK pension to my 401k in the US?

Is it possible to transfer UK pension to the US? This is a question often asked by the estimated 750,000 British expats now resident in the US, or maybe you are one of the many thousands of US citizens who have previously worked in the UK and built up some form of UK Pension benefits.

If you'll be residing in America for the long term, then naturally you'll want to look at a transfer of your UK pension into a 401k or IRA in the US.

Transfer UK pension to the US

It is possible to transfer your pension in the UK into a US retirement plan, but only in very limited circumstances. Under current legislation, you won't be able to transfer your pension to a 401k. 

➤ Find out why MyExpatSIPP is the ideal solution for US residents & citizens

When you or your employer make contributions to a pension scheme in the UK, you can receive tax relief on that contribution, sometimes up to 45%. Getting tax relief on pensions means some of your money that would have gone to the government as tax, goes into your pension instead. This is essentially the same as tax deductible contributions in the US.

The government get some of this revenue back when you draw your pension, as UK pension income is taxable. The UK government aren’t too keen on this potential tax revenue leaving the country, so the only way to move your pension away from the UK, without incurring significant tax charges, is to transfer to a QROPS.

Transfer your pension to a USA QROPS

A QROPS is an abbreviation of the term, Qualifying Recognised Overseas Pension Scheme. It is an overseas pension scheme that HM Revenue & Customs (HMRC is the IRS equivalent) recognises as eligible to receive transfers from registered pension schemes in the UK. To qualify as a QROPS, the scheme must meet a number of requirements set by HMRC.

The QROPS regime was originally proposed to allow individuals who had worked in the UK, the ability to transfer UK pension to their new country of residence. However, over time the government saw that QROPS were not being used for their intended purpose, and many people were transferring to QROPS in countries with no connection to the individuals, simply to try to avoid UK taxes. This is one of the reasons why the Overseas Transfer Charge was introduced.