It is possible to transfer a UK pension to Australia but there are specific requirements that must be met and rules that must be adhered to.
In 2015 HMRC implemented changes that put limits on the amounts that can be transferred, the minimum age of the member that is wanting to transfer, and the types of Australian pensions that can be transferred into.
What are the age restrictions?
In order to be able to transfer a UK pension to Australia you must be over 55 and not yet drawing benefits from the pension. There are exceptional circumstances where it may be possible for someone under 55 to make the transfer, but the charges associate with transferring could be higher.
Transferring a pension from the UK to Australia
For your pension to be transferrable it must be a private or company pension.
Certain types of pension can’t be transferred, these include:
- U.K state pension benefits
- Pension schemes that have fallen into the PPF (Pension protection fund)
- Other government pensions such as NHS, police or military pensions
In order to complete the transfer, it is necessary that the receiving scheme meets the requirements laid out by HMRC.
Only certain types of superannuation funds meet these requirements and are therefore deemed suitable by HMRC. These qualifying ‘Supers’ are on the list of QROPS (Qualifying Recognised Overseas Pensions) that can be found on the HMRC website.
Why transfer a UK pension to Australia?
The main reasons are as follows:
- Accessing your pension from abroad can prove expensive. Converting GBP into AUD every month and incurring a charge for the exchange can amount to a sizable cost over the long run. Moreover, the value of your monthly income will fluctuate depending on the strength of the Pound. At the time of writing this, the pound is worth 1.82 AUD. So, someone who moved to Australia in 2015 with a monthly pension in the UK of £1000 when the rate was 2.18, would have been getting $2,190. They would now be receiving almost 20% less a month, and most would not have factored this in to their budgeting.
- The fees on the pension itself could be cheaper.
- If you have multiple pensions in the U.K you can consolidate them into one, rather than paying multiple sets of fees.
There are numerous other potential benefits depending on what type of pension (DB/DC) you are transferring. For more information on the different types of pensions and specific benefits of transferring each one, you can visit our Pensions section of the website.
A transfer may not be the best thing for everyone, and it is essential to speak to an adviser before making any changes. If there is doubt around whether you will permanently reside in Australia that will also need to be considered. Transferring to an Australian super and then ending up back in the U.K could present its own issues.
What are the tax implications of UK pension transfers to Australia?
With regards to tax and your UK pension, should you decide to transfer it to Australia, it typically depends on:
- When you make the pension transfer
- The amount you transfer to your chosen Australian super fund
If you transfer your UK pension to an Australian one within six months of moving to Australia, then you can do so without any tax implications. If, however, you don’t make the transfer until after that period, the amount you transfer could be subject to a 15% tax, according to the Australian Tax Office, or ATO.
However, even though a 15% tax rate may seem high, it could still work out to be preferential to the exchange rate fluctuations your pension income would be subject to if it remained in the UK.
Referring back to the example above, would you rather pay 15% tax upfront or potentially see a 20% loss in your income for an undeterminable amount of time?
Where can we help?
Hoxton Capital Management is one of the world’s leading advisory companies on U.K pension transfers. We make it easy for you to understand all your options, the potential benefits and the potential costs associated with transferring your pension.
You can visit our Trustpilot page here to see some of the feedback from our clients or get in touch with us to speak to an adviser regarding your options.