Can You Transfer a UK Pension to a U.S. 401(k)?

Direct Transfers: Can a UK Pension Move Into a U.S. 401(k)?

Short Answer: No.

A UK pension cannot be transferred directly into a U.S. 401(k).

This is not due to lack of administrative options - it is because U.S. tax law and U.K. pension legislation do not permit it.

Why a direct transfer is not allowed:

Different legal structures

A 401(k) is a U.S. employer-sponsored plan governed by ERISA.
A UK pension is governed by UK pension law, including:

• HMRC rules,
• Pensions Act 2004,
• scheme-specific trust structures.

IRS rollover eligibility rules

To accept a rollover, a 401(k) must receive funds from:

• another U.S. qualified plan, OR
• an IRA,
• certain eligible retirement plans as defined in IRC § 402(c).

UK pensions do not meet the definition of an “eligible retirement plan” for direct transfers.

Tax treatment differences

UK pensions often include:

• contributions made pre-tax under UK rules,
• employer contributions under UK tax law,
• growth taxed under UK-approved structures.

A direct transfer to a U.S. plan would require both tax systems to treat the transfer consistently.
They do not.

No reciprocal legislation

There is no bilateral law or tax treaty provision allowing such transfers.

Conclusion:

A UK pension cannot be transferred into a U.S. 401(k).

Can a UK Pension Be Transferred Into a U.S. IRA?

Short Answer: Also no (for the same reasons).

A UK pension cannot be rolled into:

• a Traditional IRA
• a Roth IRA
• a SEP IRA
• a SIMPLE IRA

This is because:

• IRAs can only accept rollovers from U.S. qualified retirement plans,
• HMRC-registered schemes do not qualify as such under U.S. law,
• no mechanism exists to treat a UK pension transfer as a tax-free rollover,
• a transfer would be considered a distribution under U.S. rules with potential tax implications.

Conclusion:
A UK pension cannot be transferred directly into any U.S. IRA.

What Are the Actual Options for Individuals With UK Pensions?

While transfers into U.S. plans are not allowed, individuals may evaluate three general paths depending on personal circumstances.

Option 1 - Leave the UK Pension Where It Is

This is common and may be appropriate depending on:

• scheme rules,
• preservation benefits,
• investment options,
• whether you are part of a defined benefit (DB) scheme,
• long-term retirement plans.

Option 2 - Transfer the UK Pension Into Another UK Scheme

Some individuals consolidate into:

• a UK personal pension,
• a UK SIPP (Self-Invested Personal Pension),
• another UK-registered scheme.

Suitability depends on:

• fees,
• investment preferences,
• UK tax considerations,
• whether the original pension has guarantees or special benefits.

Option 3 - Transfer to a Qualifying Recognised Overseas Pension Scheme (QROPS)

A QROPS is a foreign pension scheme that meets HMRC rules for UK pension transfers.

Important notes (general, neutral guidance):

• Transfers to QROPS do not create a U.S. tax-deferred account.
• QROPS are not U.S. retirement accounts.
• U.S. tax treatment depends on specific rules, which vary by individual.
• QROPS suitability depends on long-term residency intentions.

QROPS cannot be transferred into U.S. retirement plans either.

Why Direct Transfers Are Not Allowed: Technical Overview

A direct transfer is not allowed because the U.S. Internal Revenue Code restricts rollovers to specific types of “eligible retirement plans,” defined as:

• qualified U.S. employer plans
• 403(b) plans
• government 457(b) plans
• Traditional IRAs
• Roth IRAs

UK pensions are not included in this list.

HMRC restrictions

The UK similarly restricts how pensions can move out of the UK.
Unless the receiving plan is:

• a UK scheme, OR
• an HMRC-recognised QROPS,

a transfer may not be permitted.

Thus:

These are legislative limitations, not administrative ones.

What Happens If You Withdraw a UK Pension While Living in the U.S.?

If an individual withdraws from a UK pension while living in the U.S., the following general rules may apply:

UK taxation may apply

Depending on:

• pension type,
• residency,
• the UK–U.S. tax treaty,
• scheme rules.

U.S. taxation may apply

The U.S. taxes worldwide income.

Treaty Article 17 (for pensions)

In some circumstances, the U.S.–UK Treaty provides rules about which country has primary taxation rights.

Lump sums vs annuities

Tax treatment may differ.

These outcomes vary significantly by jurisdiction and personal circumstances.

Can You Transfer a U.S. 401(k) Into a UK Pension?

This is another common question.

Short Answer: No.

A U.S. 401(k) cannot be transferred into:

• a UK pension
• a SIPP
• a UK employer plan

Why not?

• UK law restricts accepting foreign pension transfers unless certain conditions are met.
• U.S. IRAs and 401(k)s are not HMRC-registered schemes.
• No direct mechanism exists for transfer.

Withdrawals from U.S. pensions may be taxed by the U.S. and possibly taxed differently in the UK depending on residency and treaty rules.

U.S. Tax Considerations for Individuals With UK Pensions

U.S. tax considerations may include:

Worldwide income rules

U.S. citizens must report worldwide income.

PFIC considerations

Some UK pension investments may hold foreign-domiciled pooled funds requiring PFIC evaluation.

UK tax relief

Employer and personal contributions may involve UK tax relief.
These do not convert into U.S.-recognised “basis” automatically.

Treaty provisions

The U.S.–UK tax treaty covers pension contributions, growth, and distributions in certain circumstances.

Distribution taxation

Treatment varies depending on:

• lump sum vs periodic payments,
• residency at the time of withdrawal,
• treaty rules.

Currency Considerations for UK–U.S. Cross-Border Retirees

Individuals may need to evaluate:

• GBP vs USD long-term exposure
• pension income in GBP
• U.S. retirement spending in USD
• repatriation considerations
• exchange rate volatility over time
• FX fees when converting withdrawals

Currency exposure becomes increasingly relevant in retirement.

Social Security and UK National Insurance Interactions

A U.S.–UK totalisation agreement exists.

General purposes:

• prevent double social security taxation
• coordinate eligibility periods
• allow individuals to combine certain work credits
• avoid paying into both systems simultaneously in many cases

This may affect:

• U.S. Social Security eligibility
• UK State Pension eligibility
• long-term retirement income planning

Totalisation agreements do not allow pension transfers between countries.

Managing Multiple Retirement Accounts Across Countries

Globally mobile individuals may hold:

• UK pensions
• U.S. 401(k)s
• IRAs
• Roth IRAs
• foreign pensions
• savings plans abroad

Key considerations often include:

There is no one-size-fits-all solution. Suitability depends heavily on individual circumstances.

Hypothetical Case Studies (Illustrative Only)

These examples do not represent actual clients or outcomes.

Example 1 - U.S. Citizen Who Worked in the UK

Profile:

• worked in UK for several years
• returned to the U.S.
• holds a UK workplace pension

Considerations:

• UK pension cannot transfer to U.S. plans
• may remain in UK scheme or transfer to a UK SIPP
• currency and future retirement location may influence planning

Example 2 - British Expat Living in the U.S.

Profile:

• moved to the U.S.
• holds UK pensions and now contributes to U.S. plans

Considerations:

• UK→U.S. transfer not permitted
• future residency may affect withdrawal planning
• U.S. tax applies to worldwide income

Example 3 - Globally Mobile Professional

Profile:

• worked in UK, then Asia, then U.S.
• multiple pensions across countries

Considerations:

• each pension follows its own jurisdiction
• consolidation decisions depend on personal circumstances
• retirement location may change taxation

Example 4 - Dual U.S.–UK Family

Profile:

• family members in both countries
• multiple pensions and planning environments

Considerations:

• cross-border coordination
• treaty evaluation
• currency exposure

Practical Checklist for Individuals With UK and U.S. Pensions

How Skybound Wealth USA Supports Individuals

Skybound Wealth USA assists individuals with:

• understanding cross-border pension considerations,
• coordinating U.S. retirement planning with UK pensions,
• reviewing long-term multi-country retirement strategies,
• identifying U.S.-domiciled investment options,
• evaluating FEIE/FTC considerations with tax professionals,
• PFIC-aware investment planning,
• modelling long-term outcomes using MoneyMap.

Conflict Disclosure:
Skybound Wealth USA may receive compensation when individuals choose advisory services involving assets under management.
Individuals should evaluate all options before making decisions.

Next Steps

If you would like to understand how UK pensions and U.S. retirement accounts fit into your long-term plan, you may schedule a discussion with Skybound Wealth USA.