# UK Workplace Pensions and Form 3520 for US Expats (Is my UK pension plan a trust?!)



## skoog154

I am seeing a lot of conflicting information on this topic on the internet from various accountancy firms. I am looking for advice as well as an accountant who can help me do the right thing to protect my nest egg from penalties in the future due to improper filing. Thanks in advance for your comments! Here's the query:

I am a US Expat living in the UK. I have been in the UK for about a year now. I came to the UK for a new job with a UK-based firm and being a former financial planner in the US, I quickly picked up on the fact that you can save an incredible amount of UK tax by sheltering income in my workplace pension (and, yes, I understand the US tax ramifications to this).

My pension is a group stakeholder pension whereby I choose a % of salary to be deducted from my paycheck and added to the pension monthly. My employer matches a certain percentage. Currently, this is my situation:

Pensionable salary: 80,000 GBP/yr
% salary added to pension: 50% (40,000 GBP/yr)
Employer match: 9% (7,200 GBP/yr)
Total pension contribution/yr: 47,200 GBP (just below the maximum allowed)

I am making the assumption that this money will grow tax free until I start withdrawal at retirement. I am also making the assumption that I will file an FBAR. However, do I also need to file form 3520 and 3520A? Or, I suppose the question is: Is my workplace group stakeholder pension a foreign trust in the eyes of the IRS.

The pension holder is Legal and General. I assume this is a vanilla plan without exotic investments that the IRS would frown upon.

Thanks!


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## Bevdeforges

Actually, the pension fund you describe sounds remarkably like the US 401K type plan. The one catch is that the IRS doesn't recognize foreign pension plans of this nature to be equivalent to a US 401K or IRA. 

But, you may want to take a look at this article from the NY CPA association's website: Tax Stringer 

They make reference to the following:



> (Exempted are those who are based in one of the few countries that have a comprehensive pension article included in a treaty with the United States, such as Canada, the United Kingdom and Belgium.)


I'm not able to run down the treaty provision at the moment, but if you check the various IRS publications on pensions, you may find something useful.

Normally, I would tend to report the UK pension as a "financial account" but not to worry about the "trust" aspect. That way you've disclosed it, and if they decide they want the 3520 form, they can ask you for it. What I'm not sure of is whether or not the IRS will grant you the tax deferral aspect of the plan. I know here in France, we have regular savings accounts that are tax free - for French income taxes, but you're still expected to report interest to the IRS (and pay tax on it if the numbers turn out that way). However, I would definitely check the treat terms on pension plans in the UK, which may actually be to your advantage.
Cheers,
Bev


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## robnw

> I am making the assumption that this money will grow tax free until I start withdrawal at retirement. I am also making the assumption that I will file an FBAR. However, do I also need to file form 3520 and 3520A? 

No. What you are asking is "Is the UK pension a foreign non grantor trust?" to which Buzzacott says 'technically yes, if employer contributions are over 50%' although when you look at the IRS Code the '50%' part is not there and persons have asked what is the source of this figure? 

> The pension holder is Legal and General. I assume this is a vanilla plan without exotic investments that the IRS would frown upon.

Plain vanilla is not a subject that comes up, because the rules for permitted pension investments in the UK are similar to those in the USA. For background information, we have no problems with the use of self directed pensions investing in USD securities, clearing through the broker of your choice. In your case that might be an option since it is reasonable to go to your employer and ask them to contribute to your own scheme instead of the group money purchase scheme (as long as you're satisfied this is a cheaper option and one that gives you more control).

The decision to use the Treaty exemption from tax on the accumulation of inome and gains insde the UK pension (for US purposes) or not is one I leave up to you to work out depending on your unused foreign (i.e. UK) tax credits.

Rob.


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## _battersea

*So-how was it?*

The trust issues notwithstanding - weren't you concerned how IRS would view your dramatic over contribution? What happened? I'm dying to know.


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