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Standard Life pension UK
Old 04-19-2013, 05:19 PM   #1
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Standard Life pension UK

Now that I seem to be in a financial house cleaning mode....moving all our EJones money over to Vanguard....and now my wife finally has her log in to her Standard Life online account so she can see what she has. From what I can tell the 4 funds she has (Standard Life Managed pension fund, St Jupiter Merlin Balanced Portfolio pension fund, St Newton Global Balanced pension fund and St Baillie Gifford Managed pension fund) that she put £22,000 into in 2004 and has gone up to £33k now and with an estimate for £39k in 2020 when she has the right to take out a whole £1071 a year after that. She evidently can never take all the money out, but has an option to take out 25% at age 60 if she chooses. Operating costs seem to be a minimum of 1%. When I Googled online looking for gossip about Standard Life I didn't really get much.... Anybody out there know a lot about Standard Life UK pensions? After going through the Standard Life online site, it seems like there may be some other fund choices. We are about to send off an email request to the man she has met with in the past to get some more info and possible better choices for funds. But right off hand....if her fund went from £22k to £33k in 9ish years...doesn't sound toooooo bad.
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Old 04-20-2013, 06:16 AM   #2
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This tends to be a US biased forum so you might do better to find a UK forum to ask about Standard Life UK pensions. However I have some thoughts and questions.

1) What type of pension is this....it sounds like a personal pension.
2) UK pensions are usually a really bad deal for the investor. Fees are high.
3) The norm in the UK is to take 25% out UK tax free and then to annuitize the rest. This is another place where the investment firms get another pound of flesh.
4) What is your wife'c citizenship ad residency? If she is a US citizen or tax resident the UK pension will present some interesting US tax problems. Information forms like FBAR are required, the 25% UK tax free distribution will not be US tax free and you will have make sure you understand how to deal with the taxation of gains in the fund even before you take income. Also US vs UK cross border tax issues have to be considered.
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Old 04-20-2013, 08:12 AM   #3
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Originally Posted by nun View Post
This tends to be a US biased forum so you might do better to find a UK forum to ask about Standard Life UK pensions. However I have some thoughts and questions.

1) What type of pension is this....it sounds like a personal pension.
2) UK pensions are usually a really bad deal for the investor. Fees are high.
3) The norm in the UK is to take 25% out UK tax free and then to annuitize the rest. This is another place where the investment firms get another pound of flesh.
4) What is your wife'c citizenship ad residency? If she is a US citizen or tax resident the UK pension will present some interesting US tax problems. Information forms like FBAR are required, the 25% UK tax free distribution will not be US tax free and you will have make sure you understand how to deal with the taxation of gains in the fund even before you take income. Also US vs UK cross border tax issues have to be considered.
+1

Depending on exchange rates, £33,000 is very close to FATCA reporting requirements if, by chance, filing MFS. In fact, it's over the threshold for 2012 form 8938 if MFS.
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Old 04-20-2013, 09:53 AM   #4
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+1

Depending on exchange rates, £33,000 is very close to FATCA reporting requirements if, by chance, filing MFS. In fact, it's over the threshold for 2012 form 8938 if MFS.
Not sure about the FATCA....at least at this time, need to check that out more. Wife is still a Brit and plans to stay that way....although if we end up staying in the US for good she will go for dual passport status. She had no choice with the pension which was part of a divorce and has no access to it....in fact cannot take it out....a bit aggravating but she wasn't aware of it at the time. Another 7 years (60) before she has any access to it at all for the small pension. The £1k+a year I was planning on putting on my taxes when the time came. I file jointly (US) and simply since she has no income at all at this time.
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Old 04-20-2013, 12:07 PM   #5
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Originally Posted by F4mandolin View Post
Not sure about the FATCA....at least at this time, need to check that out more. Wife is still a Brit and plans to stay that way....although if we end up staying in the US for good she will go for dual passport status. She had no choice with the pension which was part of a divorce and has no access to it....in fact cannot take it out....a bit aggravating but she wasn't aware of it at the time. Another 7 years (60) before she has any access to it at all for the small pension. The £1k+a year I was planning on putting on my taxes when the time came. I file jointly (US) and simply since she has no income at all at this time.
You wife's UK pension is not a qualified retirement plan under US law. You need to pay US tax on any gains right now and navigate the foreign trust and PFIC rules or come up with a treaty argument for excluding them from your current US taxes. FBAR and FATCA are probably required if the account values exceed the thresholds. Filing jointly with your wife owning UK personal pension plan will require some reading of the US/UK tax treaty and understanding of foreign trusts and PFIC regulations
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Old 04-20-2013, 01:28 PM   #6
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Filing jointly with your wife owning UK personal pension plan will require some reading of the US/UK tax treaty and understanding of foreign trusts and PFIC regulations
To put it simply....damn.
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Old 04-20-2013, 02:24 PM   #7
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To put it simply....damn.

You basically have 2 options for dealing with this UK personal pension that holds PFICs.

1) Tax it under the regular IRS rules for foreign trusts and PFIC.
2) Use the treaty to claim exemption from tax until income is taken.

While 2) would seem to be the most logical and simple there is considerable debate amongst tax professionals whether a UK personal pension qualifies as a pension plan under the treaty. Most professionals will take the conservative route and use option 1).
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Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
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