For many British nationals who move to the United States, one of the first financial questions that comes up is how to manage a UK pension from abroad. The idea of transferring a UK pension to the USA sounds simple enough, but the reality is complex. Differences in tax rules, pension regulations, and the absence of a direct transfer route between UK and US schemes mean that planning is essential.
This article is especially relevant for non UK residents, such as British expatriates living in the US, who are considering their pension transfer options.
This guide explains how UK pensions work for US residents, what pension transfer options exist for non UK residents, how taxation applies, and how expats can best manage their retirement income across both systems.
Understanding the UK Pension System
Before exploring the transfer options, it helps to understand what kind of UK pension you hold.
There are three main types:
- State Pension – Paid by the UK government once you reach State Pension age and have enough National Insurance contributions.
- Defined Benefit (Final Salary) Pension – Provides a guaranteed income based on your salary and years of service.
- Defined Contribution (Personal or Workplace) Pension – Based on contributions and investment performance. UK pension contributions to these plans can receive tax relief, making them similar to tax deductible contributions in the US.
All three are considered registered pension schemes by HM Revenue & Customs, which is important for transfer eligibility. Each UK pension plan has its own rules for contributions and transfers.
Each of these comes with its own set of rules when you move overseas.
Can You Transfer a UK Pension to the USA?
The short answer is that you cannot directly transfer a UK pension into a US-based retirement plan like an IRA or 401(k). Under current legislation, transferring a UK pension directly to a US IRA or other US retirement plan is not permitted. The UK’s HMRC only allows overseas pension transfers to QROPS – Qualifying Recognised Overseas Pension Schemes. Currently, no US pension scheme holds QROPS status, which means a tax-free transfer to the USA is not possible.
QROPS are the only recognised overseas pension schemes eligible for a tax-free overseas transfer, and most UK providers will only allow a UK pension transfer to such schemes. If you attempt to transfer your UK pension to a non-recognised overseas pension scheme, an overseas transfer charge or UK tax charge may apply. QROPS attract a 25% tax charge if certain conditions are not met, and if your pension is transferred to a non-QROPS scheme, you could face a 55% UK tax charge. The intended purpose of QROPS was to allow non-UK residents to transfer their UK pension to a new country of residence, but the rules have tightened due to tax avoidance concerns. Only two US-based schemes, including Transform Group and certain simplified employer pensions, have held QROPS status, but currently no US scheme qualifies. All pension transfers must comply with HM Revenue & Customs (HM Revenue) regulations, and tax charges or penalties may apply if the transfer is not made to a recognised scheme.
That said, expats have legitimate strategies for managing or accessing UK pensions from the USA without triggering unnecessary taxation.
What Are My Options as a UK Expat in the USA?
Even though a direct transfer is not possible, you still have several options. There are alternative options for managing your UK pension if a direct transfer is not possible. The best approach depends on your new country of residence and the specific rules in that country. If your circumstances change, such as moving to another country after transferring your pension, additional tax charges may apply. Helping clients navigate these complex decisions is crucial to ensure compliance with both UK and recipient country regulations.
1. Keep Your Pension in the UK
You can leave your pension invested in the UK and take income when you retire. Many international advisers recommend this approach because UK providers generally allow payments to foreign bank accounts. You can keep your pension account invested in a range of assets, including investment trusts and mutual funds, which can help diversify and manage your retirement savings. Some UK pension accounts also allow you to hold investments or cash in US dollars, providing flexibility and helping to manage currency risk. However, currency fluctuations between the pound and the dollar can affect your income, so managing exchange risk becomes key.
2. Transfer to an International SIPP
An International SIPP (Self-Invested Personal Pension) is often the best solution for UK expats in the United States. It allows you to consolidate multiple pension funds into a single pension fund, retain investments in a choice of currencies, and access funds globally. International SIPPs also offer flexibility in paying benefits directly to your US bank account.
While it remains under UK regulation, an International SIPP offers better control for those living overseas.
3. Accessing Pension Benefits from Abroad
Once you reach the eligible age (usually 55), you can start drawing income from your UK pension or other retirement accounts while residing in the USA. However, you may need to pay tax on withdrawals, and the tax treatment of UK pension income is different from that of US retirement accounts such as 401(k)s and IRAs. Both the UK and US tax authorities may claim a portion of that income.
The UK–US Double Taxation Agreement generally prevents the same income from being taxed twice, but professional cross-border advice is essential to ensure correct filings.
How Is My UK Pension Taxed in the USA?
Taxation depends on your residency and the type of pension.
- UK State Pension: Usually taxable in the USA only, under the UK–US Tax Treaty.
- Private or Workplace Pension: Also typically taxed in the USA, not in the UK, provided you are a US resident.
- Lump Sums: May have different tax implications depending on how they are paid and whether tax was withheld in the UK.
For tax purposes, UK pension income is generally treated as taxable in the US. With proper planning, you may be able to avoid UK taxes on your pension income when living in the US.
Because US tax rules treat pensions differently from UK rules, it is vital to coordinate with an adviser who understands both systems.
Can I Receive My UK Pension in a US Bank Account?
Yes, many UK pension providers can pay directly into a US dollar account. Transferring your pension money to a US dollar account can help simplify your finances while living in the US. The exchange rate will affect how much you receive each month. Alternatively, you can maintain a UK bank account and transfer funds periodically to minimize conversion costs.
If you’re receiving the UK State Pension, you can also opt to have it paid into an international account through International Direct Deposit (IDD) services.
Can I Claim Both a UK and US Pension?
Yes, it is possible to receive both UK State Pension and US Social Security if you have contributed to both systems. Many US citizens who have worked in the UK may be eligible for both the US and UK state pensions. Thanks to the UK–US Social Security Agreement, the agreement between both the US and UK helps coordinate benefits for individuals with work history in both countries, allowing your National Insurance record and US Social Security credits to be combined to help you qualify for each system.
However, the total amount received will depend on your contribution history in both countries.
What Happens to My Pension if I Leave the UK Permanently?
Leaving the UK does not mean losing your pension. You remain entitled to your UK pension fund even after leaving the UK, and your UK pension provider can continue to manage your benefits while you reside abroad. However, different UK pension schemes have specific rules for overseas residents, so it is important to check the terms that apply to your situation.
However, State Pension increases (indexation) may not always apply while living in the USA, as the UK government only uprates pensions in countries with a reciprocal agreement – and the US is not one of them. That means your State Pension may be frozen at the rate first paid.
FAQs – Can I transfer my UK Pension to the US?
Can UK pensioners retire to the USA?
Yes, but immigration status must be managed separately. Your pension income can support your living costs, but it does not automatically grant residency.
What is a QROPS, and why does it matter?
A QROPS is a foreign pension scheme recognized by HMRC to receive UK pension transfers without immediate taxation. Only registered pension schemes in the UK can be transferred to a QROPS, and the UK pension scheme must meet HMRC requirements to be eligible for transfer. As no US scheme qualifies, expats typically consider an International SIPP instead.
Are foreign pensions taxable in the USA?
Yes. The IRS generally taxes worldwide income for residents, including overseas pensions.
Can I cash out my UK pension if I move abroad?
You can withdraw your UK pension from age 55, but doing so as a lump sum can trigger high taxation both in the UK and the US if not managed correctly.
Key Takeaway
While you cannot directly transfer a UK pension to a US retirement account, you can still access, manage, and optimize your pension assets from the USA. The key is structuring them correctly to avoid double taxation, currency risk, and unnecessary fees.
For most expats, an International SIPP offers flexibility, control, and compliance under UK regulation – while keeping retirement planning aligned with US residency.
Speak to a Cross-Border Pension Specialist
At Harrison Brook USA, we specialize in helping British expats in America manage their UK pensions efficiently. Our advisers are experts in cross-border wealth management, ensuring your retirement savings remain compliant, tax-efficient, and tailored to your life abroad.
Contact us today to explore how to consolidate your pensions, reduce tax exposure, and plan a seamless transition into retirement in the USA.
