When RMDs Meet UK Drawdown: One Retirement, Two Rulebooks

US required minimum distributions and UK flexi-access drawdown follow opposite logic, and retirees holding accounts in both countries need a withdrawal plan that respects each.

Plenty of mid-career professionals now expect to retire in the United States holding a 401(k) or IRA on one side of the Atlantic and a UK pension on the other. Each account was built under a different set of assumptions about when retirement money should come out, and those assumptions do not automatically reconcile just because one person owns both. Understanding how the two rulebooks differ, and where they overlap, is the starting point for a coherent withdrawal plan.

Two systems, two philosophies

The US retirement system is built on a bargain: you defer tax on contributions and growth, but the deferral has an expiration date. At a certain age, the government requires you to start withdrawing and paying income tax, whether you need the money or not. That requirement is the required minimum distribution, or RMD.

The UK went the other direction. Since the pension freedoms introduced in 2015, most UK defined contribution pensions, including self-invested personal pensions (SIPPs), allow flexi-access drawdown. Once you reach the minimum pension age, you decide how much to withdraw and when. There is no lifetime requirement to take anything out at all.

One system forces distributions on a schedule. The other leaves the schedule entirely to you. A retiree with accounts in both countries is effectively running two retirements under two different philosophies of control.

The RMD clock: what US accounts demand

An RMD is the minimum amount you must withdraw each year from traditional IRAs, 401(k)s, 403(b)s, and similar tax-deferred accounts once you reach the applicable age. Under current law, RMDs generally begin at age 73, rising to 75 for people born in 1960 or later. The amount is formulaic: the account balance on December 31 of the prior year, divided by a life expectancy factor from IRS tables.

Two details matter for planning. First, Roth IRAs have no lifetime RMDs, and since 2024 Roth accounts inside workplace plans generally do not either. Second, missing an RMD is expensive. The excise tax is 25% of the shortfall, reducible to 10% in many cases if the mistake is corrected promptly. RMD rules have changed twice in recent years and may change again, which is one reason this area rewards a current, professional read rather than a remembered one.

UK drawdown: flexibility with its own fine print

Flexi-access drawdown lets a UK pension holder take income in any amount, at any frequency, from the minimum pension age, which is currently 55 and scheduled to rise to 57 in 2028. In the UK, up to 25% of the pension can typically be taken free of UK tax, subject to a lump sum allowance currently capped at £268,275, which is 25% of the former £1,073,100 lifetime allowance, with the remainder taxed as income when withdrawn.

The flexibility is real, but so is the fine print. Withdrawals beyond the tax-free element are taxable, drawing flexibly can trigger UK rules that limit future pension contributions, and the tax-free lump sum is a UK concept that does not automatically travel across the Atlantic. For a UK resident, drawdown is a relatively self-contained decision. For a US resident, it is only half the picture.

Where the two systems collide for US residents

The first question many people ask is whether a SIPP is subject to RMDs. Generally, no. A SIPP is not a US qualified plan, so the RMD regime does not typically reach it. That is genuinely useful: the SIPP can often stay invested and untouched while US accounts are forced to distribute.

But being outside the RMD regime is not the same as being outside US tax. A US resident is generally taxed on worldwide income, and under the US-UK tax treaty, pension income is typically taxable in the country of residence. That means UK drawdown payments to a US resident are usually US taxable income, even when the UK does not tax them. The treatment of the 25% UK tax-free lump sum is one of the most debated questions in cross-border planning; positions vary, and the answer can depend on how and when the money is taken. This is squarely the territory of a qualified tax professional familiar with both systems, and rules on both sides change, so any specific figures here should be verified before acting.

Two more collision points deserve attention. Currency: a sterling pension funding a dollar retirement carries exchange rate risk on every withdrawal, and the timing of conversions can matter as much as the timing of distributions. And state taxes: some US states do not follow federal treaty positions, so a withdrawal that looks settled at the federal level may be treated differently on a state return. UK accounts also typically carry US reporting obligations, such as FBAR and Form 8938 filings, regardless of whether anything is withdrawn.

Sequencing withdrawals when both rulebooks apply

Because RMDs are non-negotiable, many cross-border retirees find it useful to treat them as the fixed element and design everything else around them. The RMD sets a floor of taxable US income each year. The open questions are what to draw beyond that floor, from which account, and in which currency.

Several general considerations tend to shape the answer. Bracket management: since RMDs already generate taxable income, adding large discretionary UK withdrawals in the same year can push income into higher brackets, while lighter UK draws in heavy RMD years can smooth the total. Foreign tax credits: where the UK withholds tax on pension payments, treaty claims and credits can often prevent double taxation, but the paperwork and timing need to line up. Pre-RMD years: the window between retirement and the RMD start age is when many people have the most control over their taxable income, which is why decisions about drawing the SIPP earlier, or converting traditional US balances to Roth, are often concentrated in those years. Estate and survivor treatment: US accounts and UK pensions pass to heirs under different rules, which can influence which pot is spent and which is preserved.

None of this points to a single correct order. It points to the opposite conclusion: the right sequence depends on residence, income, treaty position, currency needs, and family circumstances, and it usually changes over time. The retirees who fare best in many cases are not the ones who found a clever trick, but the ones who revisited the sequence regularly as balances, rates, and rules moved.

Where an advisor fits

Coordinating a US RMD schedule with UK drawdown is less a product decision than an ongoing exercise in sequencing: which account, which year, which currency, and how the tax pieces on both sides fit together. An advisor who works with cross-border families can help map the accounts, model the interaction between mandatory US distributions and discretionary UK withdrawals, and coordinate with tax professionals in both countries so that decisions are made once, deliberately, rather than repaired later. At Rosefinch Investment Advisors, this kind of two-system retirement picture is the everyday work. If your retirement spans an IRA and a SIPP, a conversation that puts both on one page is a sensible place to start.

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