US Pension Planning

Written by Edward Fricker

This document is intended for professional use only and not for client distribution.

Pension planning is an essential part of financial advice in the UK, and the same holds true in the US. What often surprises people is that US pension planning can still take place for US citizens and green card holders even while they are living and working in the UK.

This might involve contributing to a US personal pension — known as an Individual Retirement Account (IRA) — or consolidating old workplace pensions such as a 401(k). Of course, as with UK pensions, there are rules and considerations to navigate, but opportunities do exist.

Can you transfer a US pension into a UK pension?

One of the most common questions we are asked is whether a US pension (such as a 401(k) or IRA) can be rolled into a UK pension. The short answer is no.

• HMRC generally recognises US pensions as tax wrappers, but they are not considered UK-recognised pension schemes.
• Similarly, UK pensions are not viewed as “qualifying pensions” for US tax purposes.

Attempting to transfer between the two would likely trigger a significant US and/or UK income tax liability and possibly an early withdrawal charge.

What if you have a 401(k)?

If an individual has a 401(k) but no longer works for the sponsoring employer, they cannot continue to contribute to it. In many cases, it may make sense to roll this plan into an IRA — similar to how an occupational pension in the UK might be transferred into a personal pension or SIPP.

Can you contribute to an IRA from the UK?

As in the UK, in order to contribute into an IRA you must have earned income. For US taxpayers living in the UK, this raises the question: is their UK employment income reported on their US tax return?

Be cautious if the Foreign Earned Income Exclusion (FEIE) is claimed. The FEIE allows up to $132,900 of earned income (for 2026) to be excluded from US tax. However, if all income is excluded under FEIE, there is no “reportable earned income” – and therefore no ability to contribute to a US pension.

If instead all income is reported on the US tax return, contributions can be made of up to:

• $7,500 (under age 50) in 2026.
• $8,600 (age 50 or over) in 2026.

Traditional vs. Roth IRA

There are two main types of IRA in the US:

• Traditional IRA – Most similar to a UK pension. Contributions are made with pre-tax dollars (gross), growth is tax-deferred, but withdrawals are taxed at income tax rates. Withdrawals must begin at age 73 under the Required Minimum Distributions (RMD) rules, and penalties apply if these are not followed.
• Roth IRA – More comparable to a UK ISA. Contributions are made with post-tax dollars (net), and both growth and withdrawals are tax-free*. Unlike a Traditional IRA, Roth IRAs are not subject to RMD rules.

*UK treatment of Roth IRA withdrawals is not universally agreed among tax professionals, and they may be considered taxable. Individuals should always seek specialist US/UK tax advice.

How MASECO can help

These are just some of the key considerations in US pension planning. If you come across US-connected clients who may wish to explore their pension options — or if you have an existing UK-only client who once worked in the US and still has a 401(k) — please do get in touch. We can help assess the options and ensure they are considered in the context of both US and UK tax rules.

MASECO LLP is authorised and regulated by the Financial Conduct Authority for the conduct of investment business in the UK and is registered with the US Securities and Exchange Commission as a Registered Investment Advisor.