Transferring UK Pensions To Australia
If you’re planning on enjoying your retirement overseas, then Australia is a fantastic place to unwind and discover a brand-new lifestyle. However, as with any big financial move, it’s worth brushing up on some of the regulations, legislative requirements, and rules needed to process your UK pension fund.
With Brite, you’re in safe hands. Our team of leading UK pension experts is here to offer quality financial advice for those looking to transfer their retirement money to a superannuation or QROPS safely, successfully, and securely. We offer you specialist, Australian-based advice built on years of individual financial planning experience in line with UK best practices – so you can start the next chapter fully utilising your retirement savings.
For open, honest, and transparent guidance with no hidden fees, get in touch with the Brite team today.
Making the choice to transfer to an overseas pension scheme
When it comes to deciding what to do with your pension pot, opting for an overseas transfer is a popular choice for expats.
A popular feature of overseas pension transfers are the potential benefits of a lower tax charge and protections against certain charges, but you may still be liable for inheritance tax in Australia. To avoid getting caught out, it’s a good idea to check which fees and taxes you might be subject to before making a transfer – which is something your financial adviser can help you with.
So if you are looking to take control of your retirement savings, an overseas pension transfer could be a viable option – especially if you have accrued a large fund.
This could also be of interest if you have a defined benefit scheme (final salary). However, it is important to note that this is considered a higher risk transfer, so make sure to talk to a financial adviser to work out whether this is a suitable option.
For clients aged 55 and over, you can withdraw your pension pot in various major currencies, giving you greater control and flexibility over your retirement finances.
Finally, once your pension has been shifted to an overseas fund, it will be exempt from UK legislation changes in the future.
Typically, an Australian Pension Transfer is one way that our clients try and achieve these benefits – especially if they are planning to enjoy their retirement there.
Is it possible to transfer my pension fund to Australia?
To transfer your pension savings to an Australian scheme, it has to be classified as a QROPS – a qualifying recognised overseas pension – and meet a number of eligibility requirements in order to be accepted.
It is important to remember that you are not allowed to move an existing UK pension to an Australian QROPS until you are 55, due to the Australian superannuation regime. This applies to wherever you are living or working.
Notably, Australian rules do not permit people to have access to their funds until they reach ‘preservation’ age, meaning that expats must be 55 or over – but not yet drawing from their current pension – to meet regulatory requirements.
Your pension pot must also be valued at a minimum of £20,000.
What if I want to take early retirement in Australia before
In some cases, you may be able to transfer your pension to an Australian Superannuation Fund if you are under 55. However, this may have financial consequences.
Within an Australian Pension Scheme, exceptions allowing people to access their ‘super’ early are only made in very special circumstances. This could lead to potentially high charges and additional taxes if the transfer is not completed within six months of moving.
Which rules should I know before transferring pension funds to Australia?
At Brite, we align all our financial advice with the current legislative requirements and best practices within the UK and Australia. This ensures that you can make informed decisions about your pension and investments.
Your current pension arrangement will be transferred to an Australian QROPS (also known as an ROPS) – which allows British expats to move money to an overseas jurisdiction. This gives you the potential to maximise your income, enjoy the full extent of your funds and, in some cases, benefit from tax efficiencies.
These are schemes that are recognised by HMRC and are regulated by the local financial authority.
If your existing pension is part of a defined benefit scheme, an occupational pension scheme, a small self-administered scheme (SSAS), or defined contribution schemes – even multiple – can be transferred to an Australian QROPS or SIPP if you are under 55 years old.
Please note that traditional UK state pensions and unfunded civil service pensions, for occupations such as police, armed forces, teachers, firefighters, and NHS workers are not allowed.
Although ROPS schemes have been in use since 2006, a new rule was introduced in 2017 that puts a 25% tax charge on all transfers.
However, there are a handful of exceptions that will enable your funds to transfer to Australia tax-free.
If the QROPS in question is a pension scheme of an existing international company or organisation, or you are employed by someone who participates in the same overseas public service scheme you are transferring to, you will be exempt from this charge.
Additionally, if you are a resident of Australia or you’re switching to an occupational pension scheme where you are working under a sponsoring employer – you will also be able to mitigate this charge.
Before transferring your fund to an overseas pension scheme, it’s important to remember that the UK has a lifetime allowance of £1,073,100 when it comes to tax relieved pension savings. You could face a 25% tax charge on excess funds if you are under 75 and decide to transfer your funds out of a registered pension plan into a QROPS.
This will be calculated against your lifetime allowance if your transfer value is greater than your allowance.
If you’re considering your pension choices and think an overseas transfer is a great fit for your long-term retirement plans, we can build the perfect pension solution.
Our team of leading advisors are on hand with the best advice for you and your money, and together with the scheme administrators will help you reach those all-important financial goals.
To plan for your next steps, get in touch today for a simple, straightforward chat with one of our friendly advisors.
What are the benefits of transferring my pension
Transferring existing personal or private pensions to Australia through a QROPS or ROPS can offer expats a number of potential benefits.
A QROPS is usually not subject to income or inheritance tax in the UK and is often situated in countries that have a lower tax rate, such as Malta, Hong Kong, Gibraltar, Australia, New Zealand, and Guernsey.As such, benefits can be utilised in your new place of residency, meaning your pension is now under local tax rates – which may be more favourable.
However, it is important to take note of ‘double tax agreements’, which may specify that the pension is taxable solely in the UK or only within the country where you are retiring.
In financial planning, the location of the trustee chosen usually depends on where you currently reside, the double tax agreement between the country where the trustee is located and where you are planning to retire.
If you reside in a country without an existing double tax agreement with the UK, then you could still be subject to UK tax. You could possibly reclaim some of this, but it could lead to further taxation in your country of residence.
You also have the option of taking income from your existing contribution scheme in a more tax-efficient way and could access a bigger tax-free lump sum of up to 30% of the fund value.
By choosing to transfer a pension to Australian superannuation, many people aim to increase their fund’s tax efficiency and minimise the effects of the UK lifetime allowance – which can impact larger retirement amounts.
There are also potential benefits that come with streamlining your pension into a QROPS, such as consolidating multiple pensions into one pot and enjoying a multi-currency superannuation.
In addition to this, existing final salary pensions – or UK defined benefit schemes – could enjoy improved death benefits through a scheme transfer, alongside early access and potential all-time-high transfer values.
For defined contribution or personal pensions, a QROPS transfer could also offer better risk control, improved death benefit, and investment opportunities, too.
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