Transferring Your UK Pension to Australia
Emigrating is a significant and potentially life changing decision that needs careful thought and planning. One factor that many people overlook is the opportunity that exists to take their UK pension fund(s) with them when they settle in another country. Australia is one of a number of countries where reciprocal arrangements allow for this to take place.
Taking the right advice is imperative to this process; taking this advice from an internationally recognised expert in this field is, we believe, essential to your decision.
Background
Revenue regulations in Australia make it singularly disadvantageous for former UK residents to leave their pension fund back in the UK. Should you do so and start to draw benefits at retirement age then you are likely to be liable to Australian income tax, not only on every penny received in pension payments but also on the “tax free” cash lump sum that may be available from your UK scheme.
Furthermore, in the event of your premature death, any specified death benefit paid to a spouse or dependent may also become liable to Australian income tax.
Why Transfer?
If you transfer your UK pension fund to an Australian Superannuation Scheme that has received qualifying recognised overseas pension scheme status (QROPS) within the first six months of your residency in Australia then any tax charge is waived. If you transfer after the six months residency in Australia the tax treatment is still favourable, as the Australian tax authorities will only levy tax on the growth in the fund from the time you entered Australia until the time you transfer the fund.
Once your pension funds are transferred to Australia your fund will benefit from favourable tax treatment during the investment period up until retirement, and even after taking benefits.
New Superannuation Rules
On July 1, 2007 a host of rule changes were introduced to the Australian Superannuation System. Whilst these changes have been widely recognised as quite positive, one negative was the introduction of caps on how much money one can contribute to this environment, Pension Transfers included. For those with small amounts of money in Pension Funds the cap is of no consequence. However, issues begin to surface when UK benefits exceed £85,000 and particularly when benefits are in excess of £250,000.
This can be further exacerbated when one is approaching (or past) age 65, depending on work plans. We have considered these matters in depth and have developed strategies to manage these restrictions.
If you would like further information contact Gordon Hatch on gordon@taurusfinancial.com.au or call 02-9411-4161 to arrange a meeting with one of our consultants.