Dave_Val

Hi we are moving to OZ in the near future to join our daughter and grandkids. I am in the RAF and will have a pension when I leave. Are there any Ex forces people out there who can advise me on the best way to manage it. Leave it in UK or Move it if you can. Many thanks

22B

I don't think anyone can advise - only explain the options.....

You say you have a pension - to me this means you will be drawing down and actually receiving money. In which case, I don't know much about this, but I think your options are limited to (a) having it paid to either a UK account or (b) having it paid to an Aus account. See below for implications.

On the other hand, if you mean you have a pension entitlement held by the RAF and you aren't actually receiving it yet, then there are more options.

(1) You can leave the fund with the RAF and have it paid as (a) or (b) above. Doing this means you keep the same 'terms and conditions' such as defined benefit, death/disability benefits, etc as if you stayed in the UK.
But the fixed payouts are in sterling, and you need Aus$. If you choose (a), then every so often you will have to arrange a transfer to Aus, and of course you will try to do it when the exchange rate is favourable. If you choose (b), then the money will be automatically sent to Aus by the RAF, but at whatever exchange rate prevails on the payment date. Could be good, could be bad.

(2) Alternatively, you can elect for the RAF to hand over your entitlement to an Aus pension (known as' Super') provider. The RAF will calculate (read 'guess') how much it will cost them to pension you for the rest of your life, put it in today's terms, and then offer you that lump sum amount to bugger off. If you take this money, you will lose all other RAF rights - it will be as if you never existed. The lump sum must go into your Aus Super, who will invest it in to the stock market (or hold it as property, cash - as you direct). It is then subject to the vagaries of investment - it may go up as well as down. (So, if you don't need it for, say, 10yrs, then investing in the market now is good as it will likely grow by the time you draw it. If you need it now, less good.)
To make option (2) happen, you need to join an Australian SuperFund that is UK QROPS. The SuperFund will then apply to the RAF for the dosh. There are lots of forms and it takes months and months.

But you also need to think about tax. I'm not sure, but I think income under option (1), a or b, will be taxable in Australia.
Under option (2), if the lump sum arrives in Aus within 6months after you do, nothing is taxable. If it arrives after 6months, then you have to pay tax on the growth between your arrival date and it's arrival date, but I think the payouts are still tax-free.


I think that's the basics...........

Dave_Val

Many thanks fo the information.

Dave

yakka and Deb

Dave,

I am also in the RAF, last day 13 Mar 2011 but with termination etc i hope to move out in Dec 2010. (I have been granted visa etc)

I spoke with a financial consultant from Montfort International at an expo in London. http://www.miplc.co.uk/

He gave me various options in respect of the pension: I will be taking maximum commutation and receive the subsequent pension free from UK Tax, I will then have to declare the pension as earnings and pay AUS tax which is slightly higher than the UK but can reclaim the difference in the tax returns. He did say that if i didnt need the cash there were options to deposit it offshore to pay little or no tax.

The company is based in Surrey and have seminars around the UK. I dont usually use agents, we did the visa all ourselves, but with the minefield of financial planning i think i might be taking him up on the job.

He also assured me that i will qualify for the index link at age 55, which is quite a large jump ... Thats a bonus...!

I was going to open a London transfer account with http://www.commbank.com.au/ to build up a credit history but have decided that i will look to open an account when i go over in May.

Best of luck

Yakka

22B

Hi yakka,

Please double-check this with someone else before you make any binding decisions.

All my years of accountancy training, confirmed by experience in Australia, tell me that in the final outcome you will always have paid tax at the highest rate, which in this case is the Aus rate.
The only 'difference' you can claim back is if you have been taxed twice, which you won't have been seeing as in the UK you pay nowt.
The only way to avoid paying Aus tax on your UK pension is to have it transferred to Aus. (see above)

In other words, I think your Montfort bloke is talking bo11ok5. (And let's face it - if he knew how to make money, he wouldn't have to work as a financial adviser, right?).

Good luck!

scotvness

He will not be able to aviod paying Aus tax on his pension by simply having it transfered to Aus - this money is classed as income (in Aus you pay tax on world wide income) and will have to be declaired on his tax return as such and will be subject to tax.

Only option I can see for paying no tax is to sacrifice 100% into his super.

Scot

22B

You are correct that income from a pension held in the UK will be taxable in Aus.
To clarify, I meant transfer the entitlement, i.e., the RAF gives a lump sum to a Aus super-provider. Any future income streams from the super are tax-free.

yakka and Deb

LOL - I will indeed seek plenty of advice before commiting any of the hard earned, crikey, Er indoors can spend it quicker than most.....

Dave_Val

Hi Yakka,
Thanks for the info, your right the finance side is a minefield, we have also done our own emigration paperwork, but like you i will take on a expert when it comes to the money side.
Best of luck for the future hope all goes well for you both.

Dave

Bookmark

There are many advantages to having your pension monies in Australia Superannuation as opposed to the UK, even Final Salary (RAF) schemes.

Please note that the funds CANNOT be transferred as a lump sum once the RAF start paying you an annual pension or annuity - so get advice prior.

If you haven't commenced a annual pension or annuity, you really only have 2 options:

a) Leave the Pension fund in the UK - & draw an income stream from the UK, or
b) Transfer it as a lump sum to Australia?

If you transfer shortly after you arrive in Australia, you will pay little or no Aust tax - & thereafter you’ll pay no tax at all in retirement from Australian super.

22B is quite up to date with the state of affairs but everybody's situation is different so you should get some advice specific to your circumstances so you can make an informed decision about what's best for you.

Drew Hawkins

Dave_Val

Cheers Bokmark think I need to seek an expert who knows th in's & outs with OZ super.

Dave

22B

Expert? No such thing.

The Woods

I transferred to the RAAF in July 2008, and therefore have not been here a full financial year, so am still wondering how the tax implications will play out.

I contacted the UK tax office, who still charge me income tax on my RAF pension and have given me a revised tax code. I also contacted Xafinity Paymaster, who sent me a form which enables payment directly into an Australian bank account. I haven't actioned that yet, but plan to in the next couple of months. I am fairly certain that you cannot transfer you pension 'fund' from HM Forces into an Australian super - as there is no such fund in reality.

I also commuted the maximum I could - and I would recommend looking at Pprune to see discussions on that subject. It's also worth tracking the exchange rate and picking the day you transfer your money - it makes a difference.

Good luck.

22B

You definitely can. See 2nd post on this thread, option 2.

paul.joanne.fraser

Hi there, I am about to leave the RAF and transfer to the RAAF. I am also in this position with regards to my RAF pension. Although joining the RAAF in August, my RAF pension will not kick in till mid december.

Can I ask you about commutation. Did you commute the maximum because of possible tax implications with your new wage, what is the Oz higher tax threashold?

I also have a rental property in the UK, and we hope to sell in the near future, difficult with me being in Akrotiri at the mo.

Look forward to hearing from you, might ask a few more questions regarding the transfer etc, hope you will not mind.

Thanks

Paul