Claiming your pension in the USA
We discuss the best, and most cost effective ways of managing your pension payments after you’ve purchase property in the USA.
When you are relocating to the USA, you will need to contact the following organisations prior to departure to inform them of your move, and to supply them with your new information:
- The International Pension Centre (if you are already receiving a State Pension)
- HM Revenue & Customs’ National Insurance Contributions Office
- Your local Tax Office
Drawing a pension in the USA is a relatively simple process.
Drawing a pension in the USA is a relatively simple process. There are two main options for doing so:
1. Direct payment into US bank account
If you are relocating permanently to the US, you may want to have your UK pension paid directly into your US bank account. Should your plan be to split your time between the UK and the USA, you need to decide whether it makes more sense to have your pension paid into your US bank, or to keep payments coming into the UK account. You need to determine which option works best for your circumstances.
2. Paid into UK account and transferred to the USA
Many opt to continue receiving pension payments into a UK account, and then they take responsibility for managing the transfer of this currency into their US account. If this is the option you go for, you must remember that fluctuating currency exchange rates will affect the amount you receive every time you transfer. To avoid being negatively affected by these fluctuations, speak to Smart Currency Exchange about setting up a Forward Contract. This allows you to lock in an exchange rate that you are happy to trade at for up to a year, which is an incredibly helpful budgeting tool. Smart Currency Exchange can also help you to automate all of your regular payments between the UK and the USA.
UK state pension
If you’ve been paying into a UK state pension, you should expect to receive a claim form from the UK Pension Service four months prior to retiring. It will be up to you to let them know that you are moving to the USA, and to provide them with your new contact details
Many opt to continue receiving pension payments into a UK account.
To establish the best option for receiving your private pension whilst in America, we recommend you consult your pension provider. They should be able to move the payment to a US account with relative ease, but remember that if this is the route you choose, the international currency markets will then affect these payments. This means you need to formulate a plan to ensure you maximise your savings. Speak to Smart Currency Exchange today about how you can best manage these regular payments.
Tax on your pension
Whether or not you are taxed on your UK state pension will depend on the following factors:
- Whether you’re declared as “non-resident” in regards to tax purposes
- Which country you are deemed tax resident in. If you reside in the USA permanently, you will be classed as a non-UK resident
- If you alternate between the UK and USA, you’re likely to remain UK resident for tax purposes
- If you are deemed non-UK resident, you will pay tax on your pension in the USA
As each individual’s circumstances will differ significantly, it’s prudent to consult an independent financial advisor (IFA) to establish what works best for you. Your financial advisor will be able to help ensure you get the best from your hard-earned nest egg.
The USA Buying Guide covers every stage of the property buying process, sharing our experience and knowledge to ensure a safe and successful property purchase. The guide will help you to: