Transferring Your UK Pension to Australia
Whether you are a UK Expatriate or you are back living in Australia having spent time working in the UK, you may be wondering how you can transfer your UK Pension Plan to a similar arrangement in Australia.
In this guide, we will cover the most commonly asked questions we receive from individuals seeking to transfer their UK Pension to Australia.
Can I transfer my UK Pension funds to Australia?
Yes, but there are some points you need to consider in order to satisfy the criteria of a UK Pension transfer to Australia.
- You must be aged between 55 and 75 years
- If you are between the ages of 67 and 74, you must meet the criteria of the ‘Work Test’. In summary, you must have been employed for at least 40 hours in a period of not more than 30 consecutive days during the financial year to pass this test.
- You can only transfer your UK Pension into a scheme that is registered with HMRC as a Qualifying Recognised Overseas Pension (QROPS).
- If you are not an Australian resident, then your UK Pension transfer will be subject to the Overseas Transfer Charge of 25%
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What is a QROPS?
QROPS stands for ‘Qualifying Recognised Overseas Pension Scheme’. A QROPS is an HMRC registered pension scheme which can accept a transfer of UK pension funds. They were introduced in 2006 specifically for the benefit of UK residents living overseas, who intend to remain outside the UK permanently. The QROPS provides them with a means to continue saving for their retirement and also transfer any accrued pension funds in the UK to it.
In order for an overseas scheme to qualify for ‘QROPS status’, it must meet certain strict criteria set by HMRC. If you transfer your pension to a plan that is not a registered QROPS, you will face a significant penalty so be sure to check that the pension scheme you are intending on transferring to is listed on the HMRC ROPS list.
A full list of registered QROPS schemes can be found here.
If you set up a Self Managed Super Fund, you can apply to HMRC for QROPS registration in order for your fund to accept a transfer of your UK Pension monies but this is a complex and time-consuming process. Alternatively, you can transfer your UK Pension to our Australian Expatriate Superannuation Fund which is Australia’s ONLY Retail Superannuation that is registered with HMRC as a QROPS. This would mean that you can completely avoid the complex registration process as this is all in place with our fund.
What is the difference between an SMSF and a Retail Superannuation Fund?
SMSFs and Retail Superannuation Funds are both technical products and to compare the two of them fully would require a separate guide. See our guide HERE!
An SMSF stands for Self Managed Super Fund and as it states in the title, is a self managed fund. This means that the ongoing day to day management, administration, financial reporting and investment decisions is your responsibility as Trustee of the fund. An SMSF carries a much heavier level of responsibility than a Retail Superannuation fund and due to its complexity, it is essential that you have a thorough understanding of how they work and the legislative requirements of managing them. For more information on SMSFs, view our article What is an SMSF?
Many individuals prefer to have this level of control and responsibility and are competent enough to do so through their firm understanding of what is required to run an SMSF correctly. However, many individuals would also rather not have this responsibility or liability and therefore outsource the day to day running of the fund. In many cases, this can be very expensive and not cost-effective if the size of their fund is relatively small.
This is one of the reasons that more and more individuals are opting to transfer their UK pension to our Retail Superannuation fund. Our Australian Expatriate Superannuation Fund is very similar to the structure to a UK Personal Pension plan in that all of the ongoing day to day administration and management is handled by us as the provider and not you. This removes the administrative burden away from you as the investor. Compliance and management reporting responsibilities are also handled by us, the same way Personal Pension Plans operate in the UK. You also do not need to worry about the complex set up process and QROPS registration with HMRC, in order for your fund to be able to accept your UK pension monies, this is all in place with our Retail Fund.
The key difference in structure between both funds may be a reason that we are seeing cases where individuals are opting to set up a Retail Superannuation fund over an SMSF, particularly those who are transferring a UK pension to Australia. Its a simple set up and transfer process. Many people also prefer to save for their retirement in a secure product without the ongoing administrative headache that may come with a Self Managed Super Fund. We are finding that most people we talk to would favour the structure of a Retail Fund over a Self Managed Fund, once it has been explained to them.
What are the benefits of transferring my UK Pension Funds to Australia?
The first and most obvious benefit of moving your UK Pension funds to Australia would be to ensure that your retirement savings were housed in your country of residence. With different time zones in the UK it can be somewhat of an inconvenience contacting your UK scheme to discuss your pension.
If you began withdrawing funds from your UK pension whilst living in Australia, you would also need to apply to HMRC for a double taxation agreement to ensure that you did not get hit with a tax bill in both countries.
Receiving income in two different countries can sometimes be sticky so you may even need to contact a tax adviser to manage your arrangements, which would come at an added expense to you.
There are other benefits which you should also consider:
- If the transfer occurs within 6 months of you becoming an Australian resident then the transfer of funds could be tax-free.
- From the age of 60 where the foreign super transfer has been taxed at 15%, the income benefits are generally tax-free.
- You may flexibly draw your pension benefits during retirement.
- Your UK pension funds will not be subject to UK Income Tax charges upon death.
- You can consolidate all of your UK pensions into one manageable pension plan, in your country of residence.
What type of UK Pension can I transfer to Australia?
You may transfer the following types of UK pension arrangements to an Australian QROPS:
- An Occupational Pension Scheme.
- A Defined Benefit Scheme
- A Defined Contribution Scheme
- A Small Self Administered Scheme (SSAS)
The following types of UK Pensions are not permitted to transfer:
- UK State Pension
- Unfunded Civil Service Pensions which include NHS, Teachers, Fire Fighters, Police and Armed Forces.
What are the charges for transferring my UK Pension to Australia?
Firstly, if you are a resident in Australia, you would be exempt from the Overseas Transfer Charge of 25%.
Some UK Pension providers do impose a charge upon transferring your funds out of their scheme and so this is a point you should always check.
The charges we would apply for administering the transfer of your UK pension to our Australian Expatriate Superannuation fund would be:
- Establishment (Set up) Fee – $595
- Transfer in Fee – $195 per transfer
You can also see a full summary of our fees here – AESF Fee Summary
Tax Treatment of your Pension Transfer
When transferring your UK Pension to Australia, you may be subject to a tax charge upon transfer. Tax is based on the investment growth achieved within your UK pension plan, from the date you became an Australian resident, to the date you transferred your UK pension into Australia.
If transferring to our Australian Expatriate Superannuation Fund, then you can opt for tax to be charged at a fixed concessional rate of 15% and we would pay this to the Australian Tax Office, on your behalf, once we receive the transfer of your UK funds.
Overseas pension transfers are classed as ‘non-concessional’ contributions and you are permitted to transfer up to $330,000 plus investment growth, without an excess contribution charge of 45% being applied.
Do I need a Financial Adviser to transfer my UK Pension to Australia?
We would always recommend that you seek financial advice if you are unsure of the implications involved with transferring a pension. However, in some cases, you may be able to transfer your UK pension without the involvement of a Financial Adviser. This would depend on a few scenarios.
Firstly, it would be compulsory to involve a Financial Adviser where you are transferring a UK Defined Benefit Pension (i.e. Final Salary). Due to the nature of these plans and the guarantees they hold, it is a regulatory requirement from the UK Financial Conduct Authority (FCA) to obtain a Transfer Value Analysis (TVAS) report from a UK Qualified Financial Adviser. Your UK scheme would not allow funds to be transferred out of your plan without this report.
If you are transferring a standard UK Personal Pension, you may do this yourself but we would not recommend this unless you are comfortable with the transfer process and you have a firm knowledge of the investment markets.
For many people, their pension is their largest asset for providing income when they retire so it’s important to ensure its managed correctly and the correct decisions are made, tailored to your circumstances and objectives.
If you are looking to transfer your UK Pension to Australia, contact us today for more information and a member of our team would be happy to answer any questions you may have.
IVCM Australian Expat Superannuation Fund (AESF)
Our Australian Expatriate Superannuation Fund is currently THE ONLY Retail Superannuation in Australia that is registered with HMRC as a Qualifying Recognised Overseas Pension Scheme (QROPS). This means it is the only retail superannuation fund in Australia that can accept a transfer of UK pension funds. With the addition of a great choice of investment funds, this makes it an extremely attractive product and home for your retirement savings.
This article does not contain personal or financial advice. It is provided for general information only and does not take into account your personal objectives, financial situation or needs. IVCM is not authorized to provide you with any personal or financial advice.
If you require financial any advice then you must make sure that you obtain advice from a suitably qualified financial adviser.