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How do UK workplace pensions work for Americans?

By LandfallFor US citizens and green card holders moving to the UKDownload as PDF

The short answer

Your UK employer will usually enroll you in a workplace pension automatically, with you and your employer both paying in. The US–UK tax treaty generally lets that pension grow without US tax, and can give US tax relief on contributions, within limits. Personal pensions and lump sums need more care.

Automatic enrollment

UK employers must automatically enroll eligible workers into a workplace pension. If you’re 22 or over and earn above a set amount, you’ll be enrolled unless you opt out.

  • You and your employer both contribute, with legal minimums. Many employers pay more, especially if you pay more too.
  • Your contributions usually get UK tax relief, so a contribution costs you less than its face value.
  • You can opt out, but you’d usually lose your employer’s contribution.

How the US sees your UK pension

Under the US–UK tax treaty, a UK pension scheme is generally respected by the US:

  • Growth inside the pension generally isn’t taxed in the US until you take money out.
  • Contributions to a UK workplace scheme can often be deducted or excluded on your US return, within US limits, if conditions are met.
  • Employer contributions can usually be kept out of your US taxable income, again within limits.

These benefits depend on meeting the treaty’s conditions, which are clearer for employer schemes than for personal pensions such as a SIPP.

Watch-outs

  • The 25% tax-free lump sum that the UK allows may not be tax-free in the US. Plan withdrawals with both countries in mind.
  • Reporting: UK pensions usually need to be reported on your FBAR and Form 8938, even though they’re not taxed each year.
  • Funds inside personal pensions can raise US investment issues if they aren’t covered by the treaty.
  • Salary sacrifice arrangements change how contributions show on your payslip; check how they’re reported in the US.

The UK State Pension

National Insurance contributions build your UK State Pension record. You usually need 10 qualifying years to get any State Pension and 35 years for the full amount. The US–UK totalization agreement can count time in both countries towards eligibility for each system’s benefits.

What to do next

If you’re moving with a 401(k) or IRA as well, read what happens to your 401(k) and IRA. For larger pensions, cross-border financial planning advice usually pays for itself.

Free · about 2 minutesSee every step for your moveBuild your move planRelated guideWhat happens to my 401(k) and IRA when I move to the UK?Related guideHow do I build a UK credit history?

General information, not personal advice. Spotted something out of date? Tell us.