Thousands of people from the UK immigrate to Australia every year to settle, work and build a new life in the sun. Having gone through this transition myself 14 years ago, I know the many rewards and challenges that come from permanently moving countries and financials can be one of the most confusing and unsettling elements.
Australia’s retirement program differs from that of the UK and it can prove overwhelming to navigate the complex and technical process to transfer accumulated UK pension funds over to the Australian superannuation system without the help of a professional. However, having a financial plan in place for your retirement can give you peace of mind that your retirement goals will be met.
Whilst the below information is not an exhaustive list, some points to consider when planning to transfer a UK pension to Australia to fund retirement goals are:
AGE
The age at which you are able to access pension funds in the UK is 55. Therefore, your options are limited before you reach this age but once there, you are able to access and transfer the funds from the UK to Australia (if criteria is met). Once in the Australian superannuation system, the Australian conditions of release rules apply, which means turning age 60 and fully retired or reaching age 65 regardless of employment status.
QROPS
QROPS — also known as a Qualifying Recognised Overseas Pension Scheme – is the only scheme HMRC recognises as eligible to receive transfers from registered pension schemes in the UK. The majority of retail superannuation funds in Australia do not meet QROPS requirements, since funds may be accessed prior to age 55 under certain conditions such as hardship rules. Therefore, the Australian fund receiving the UK pension money must be a qualified QROPS registered fund, otherwise there may be additional tax and possible hefty penalties applied and therefore very costly to get wrong.
TAX
Generally, your funds are not taxed by the UK upon transfer if you are an Australian tax resident, but there will be Australian tax applied on the growth portion of the funds from the date Australian tax residency is granted to the day of transfer. Thereafter, usual Australian taxing rules at 15% within Superannuation apply. In contrast if you were to transfer to a non-qualifying arrangement there could be HMRC tax of 55%.
Once superannuation funds are transferred into the Australian pension scheme, all returns and withdrawals are tax-free.
If funds are transferred within 6 months of becoming a resident then the transfer of funds could be transferred tax-free.
ELIGIBILITY
There are strict guidelines around what funds can be transferred to a QROPS. The type of UK pension you hold is essential to a successful transfer — the scheme has to meet UK rules on transferring pensions out of the UK system and into an overseas fund.
The minimum balance required to transfer is 20,000 pounds.
As long as you are eligible to receive it, your state pension shouldn’t cause any difficulties if you retire to Australia, you can either keep your UK account or have the pension paid to an Australian bank.
BENEFIT
Having all of your retirement savings consolidated in your country of residence makes your retirement finances much easier to manage. Having your funds in the same currency will provide certainty of its value as the cash is not subject to currency fluctuations and conversion values, which could have a significant impact on the amount and longevity of your retirement funds.
After funds are transferred, it is essential that the correct investment portfolio is selected so that the funds are invested in Australia in a way that you are happy and comfortable with. Taking into consideration your appetite for risk and investment time horizon, now that the funds are transferred you want to make sure that your money is working for you and building for that Australian retirement.
Consulting with a Perth financial adviser who has direct knowledge of the practicalities of transferring assets and navigating the tax and pension landscape can provide clarity and peace of mind around your retirement finances and help you enjoy retirement in Oz. For more information, contact us.
This article is for general information purposes only and should not be taken as financial advice as no personal circumstances were considered. Please refer to a finance professional before making any financial decisions.
Jodi Escudier is a financial adviser who helps women and families identify and reach financial goals through positive strategic advice. Over the last 8 years, Jodi has worked together with clients to develop a pathway to a better financial future and secure wealth for themselves, both now and as they navigate life’s ever-changing demands.