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Expat must sell unit trusts and oeic

Financial discussion for any financial queries for Expats
artengill
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Expat must sell unit trusts and oeic

#54272

Postby artengill » May 16th, 2017, 3:10 pm

Hi,

A friend of mine who has now lived in the USA for about 5 years has been informed by his UK investment company that he must sell his UK oeics. This includes his pension pot. If its current value is say £30,000 will he get this amount in cash or will he have to pay tax on this? Ideally he would like to keep the pension money invested in the UK and not go through hoops with currency exchanges etc.

Any recommends or comments, please

Regards

Mike

TedSwippet
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Re: Expat must sell unit trusts and oeic

#54299

Postby TedSwippet » May 16th, 2017, 5:17 pm

artengill wrote:A friend of mine who has now lived in the USA for about 5 years has been informed by his UK investment company that he must sell his UK oeics. This includes his pension pot.

To be clear, is he being told to clear out entirely? Or just to move out of OEICS and perhaps into other investment vehicles?

If the latter, the cause is probably a combination of pressure from a rotten-to-the-core US law known as FATCA and Regulation S of the US's 1933 Securities Act which restricts sale of non-US mutual funds to US residents. In that case, his best option is going to be to sell the OEICs and re-invest the proceeds in something else. ETFs probably won't cut it, but a selection of individual shares should be okay. Admittedly not a great way to diversify, but better than a forced entire cash out.

Thanks to FATCA and a huge amount of sabre-rattling by the US against non-US banks and financial institutions, many of these are now refusing service entirely to both US resident and US citizens resident in that bank's own country. Depending on circumstance, your friend may well be forced into closing out any trading and/or ISA accounts he has. He'll be unlikely to be able to move these intact to any other broker or platform.

So far I know of no case where a pension provider has forced a closure, but that doesn't mean it hasn't happened. That could be truly sticky, since withdrawal under age 55 could under some conditions, and depending on the amounts involved, be viewed by HMRC as an unauthorised payment, leading to some unpleasant penalties (on the provider also, which is why I don't think it's happened, or if it has then it would be rare).

With most/all UK financial institutions out of the picture, then, your friend might want to contact some international brokers. Interactive Brokers and Saxo spring to mind. Or they could bite the bullet and cash in everything except the problematic pension and move the lot to the US. The IRS's view of the world is "US good, others bad," so at least that way he'll sidestep a lot of IRS landmines around US residents holding 'offshore' investments.


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