This thread is designed to provide some general information in relation to transferring UK Pensions to Australia as this may be one of the biggest financial decisions you make with respect to living your new life here.
HMRC allow individuals the ability to transfer their private/company Pensions overseas including to Australia so long as it is transferred to a QROPS fund. QROPS stands for Qualifying Recognised Overseas Pension Scheme.
What is an Australian QROPS?
An Australian QROPS is simply an Australian Superannuation Fund that has registered with HMRC UK to be able to receive UK Pension monies and the scheme has agreed to adhere to the reporting obligations set out by HMRC. The reporting obligations are in place for 10 years from when the Pension arrives into the Australian scheme.
Other than this it is no different to any other Australian Superannuation Fund in terms of the way it operates.
Do I have to transfer my Pension?
No, there is no requirement to transfer a Pension out of the UK it can be left in the UK and the benefits taken at the retirement age of the scheme or the legislated age of retirement.
Should I transfer my Pension?
There is not a definitive answer to this as it depends on a number of factors, for example ones residency status ie permanent or temporary, intention to remain/retire in Australia, type of UK scheme ie final salary or market linked etc etc.
Having UK retirement monies in Australia can be more favourable in some cases than leaving them in the UK as there are some very good benefits available here as follows: (not exhaustive)
- Generally tax free upon withdrawal and in retirement;
- Greater control over the funds;
- May help boost Australian Age Pension entitlements;
- Generally 100% of funds can be passed to the family upon death with little or no tax implications;
- More flexibility in retirement as up to 100% of the funds can be accessed.
However it does not always make sense to transfer a Pension and so it is recommended that advice is sought to understand your position based on your individual circumstances goals and objectives.
The Australian superannuation system can be very different to the UK system especially if the UK scheme is a defined benefit (final salary) scheme and so by transferring from the UK to Australia it could mean that you are entering a completely different type of arrangement.
How long do I have to transfer my Pension?
There is no time limit in place in relation to transferring a UK Pension there is however a ruling in place in Australia that gives a 6 month time period in which an overseas Pension/Superannuation fund can be transferred in without any taxation implications on growth.
Once over the 6 month period UK Pensions can still be transferred to Australia but there may potentially be tax to pay on the transfer with regard to any growth of the fund.
However do not feel pressured to have to make a transfer within the first 6 months as the tax is generally not as onerous as may be suggested and there are generally ways to mitigate a tax liability.
I am a temporary resident does this make a difference?
Yes, in my opinion it is very unwise to transfer a UK Pension to Australia whilst a temporary resident, there are now systems in place in Australia that mean if one does not obtain permanent residency and thus has to leave Australia after transferring their UK Pension serious breaches could occur which could potentially result in penalties of between 40% - 55% of the fund.
Therefore unless it is guaranteed permanent residence will be obtained then this could be a dangerous path to take.
Once a Pension is transferred can it be accessed?
If a UK Pension is transferred to an Australian QROPS Superannuation fund there are still obligations to HMRC with regard to the monies. There are reporting obligations in place for a period of time after a transfer occurs and there are also rules around how and when this money can be accessed.
If one has been a UK tax resident within a certain time period, failure to adhere to these conditions laid out by HMRC may result in a breach which could lead to a charge of between 40% - 55% of the fund.
In addition to this once the funds are in the Australian Superannuation environment they are also subject to the rules of Superannuation legislation and can only be accessed accordingly.
Transferring a UK Pension to Australia is likely to be big financial decision, there can be implications of transferring and even implications if you decide not to transfer and having a full understanding of the implications involved should be understood.
If a transfer is the approach decided upon or advised the procedure can be very complex and technical and does not end once a transfer is carried out due to the many rules surrounding the UK and Australian Pension/Superannuation environment like contribution caps and unauthorised payments.
A breach of these rules can lead to hefty tax penalties therefore ensuring it is done correctly is essential.
Please note that the above is general informationonly and should not be taken as financial advice