# Pensions and Taxes



## drpaulmhine (Jul 30, 2009)

I live now in the USA and an occupational retirement pension is soon going to be coming from the UK for the time when I worked there.

I have two basic options:

1) Monthly pension with no Pension Commencement Lump Sum (PCLS) or,
2) Pension Commencement Lump Sum (PCLS) PLUS a reduced monthly pension.

It's my understanding that my estimated monthly pension will be taxed in the UK through the PAYE system, so I will get a net (post UK tax) amount. However, will that post UK tax net amount then be retaxed by the US when I receive it?

It is also my understanding that if I took the PCLS and reduced monthly pension, the PCLS is given to me free of UK taxes. However, once I receive it, would it be taxable by the US as income?


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## Fatbrit (May 8, 2008)

I'm no tax guru....but my understanding is that if you are resident in the US but not the UK, then none of it is taxable in the UK but it is all taxable in the US.


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## Bevdeforges (Nov 16, 2007)

There definitely is a social security treaty between the US and UK that would cover this. You may want to take a look here HM Revenue & Customs: International - Social Security Treaties for starters, though I warn you, no treaty is easy reading!

I'm not familiar with the US-UK treaty and I have yet to bring myself to actually read the US-France treaty that affects me in a few years, but my hunch is that any monthly pension you receive will be subject to US income tax. Any lump sum distribution could be up for grabs, depending on the exact nature of the pension involved.

Oh, and the IRS has a publication on this http://www.irs.gov/pub/irs-pdf/p901.pdf that should be of interest.
Cheers,
Bev


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## drpaulmhine (Jul 30, 2009)

Thanks Bev,

Your last link was very useful but seems to only apply to government and local authority pensions, i.e. social security distributions.

For those in the USA, I have just located the following IRS document that deals with the taxation of foreign pension and annuity distributions, i.e. from commercial entities and businesses, not just social security distributions:

"The Taxation of Foreign Pension and Annuity Distributions"

It can be found on the irs.gov website, and can be found after you type in "foreign pension" in their search box. It's part of the IRS' International Tax Gap Series, dated October 2008.

Sorry it's not a true link but the forum rules state that I can only post a URL to another site after I have made 4 posts or more.


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