john in oz

UK Pension Transfers fall under the HMRC Qualifying Recognised Overseas Pension Scheme (QROPS) rules, which allows the transfer of UK Pensions off shore to other countries including Australia.

You should seek assistance from a Professional especially when it is a large balance given the Taxation Rules, Superannuation Contribution Limits. Foreign Exchange Discounts may also be achieved on larger balances!

Some of the rules include:


1. The UK funds must be received and retained in a QROPS Australian Super Fund for a period of 5 full UK financial years (April to April) after departing the UK.


2. Recognised funds types are Retail, Industry and SMSF if approved by HMRC. The UK National Insurance Scheme - Basic State Pension can not be moved or transferred. in some limited circumstances some pensions that are are being received as a paid pension may be able to be moved.

3. It is a fund to fund transfer only - you cannot cash it in.

4. You cannot access the funds until you reach retirement age. This will vary in accordance with both the UK and Australian rules from age 55 onwards.

5. Any unauthorised access of funds will incur a 55% tax from HMRC.


6. Should you be of retirement age and you are within the 5 year rule then you can draw down a pension the same as if you were in the UK. However after 5 years there are no limitations in Australia. Please note that proposed changes to UK Rules may affect this from April 2015.

7. Tax payable in Australia/UK. There is no tax payable from the UK Government; however, you do pay tax in Australia on any earnings in the fund from date of arrival to date of transfer.

In saying this - there is NO TAX PAYABLE if the transfer is received within 6 months of arrival!

Where tax is payable it can be done and paid for at 15% within your super fund or you can do via your tax return at you personal marginal tax rates but you are not able to use the super fund to pay for it.

Example. Date of arrival fund is worth 10K Aud and when transferred it is worth $ 11K Aud. The earnings/growth is $ 1 K Aud, which is what you pay tax on. If done within super then $ 150 tax is paid from the super. If done via personal tax return the you can pay up to $ 450 in tax out of your own pocket.


Summary:

UK Transfers can be straight forward but are fraught with taxation traps especially where large balances are involved. Failure to get it right can result in up to 55% in penality taxes. You should always seek advice from a professional!!

UK Pension FACT Sheet is Attached!!


Cheers John

john in oz

Please find attached up dated changes for April 2015 currently being put before parliament.

These include the ability to access your funds as you see fit from aged 55 as well and a stop to the transfer of funds out of Unfunded Public Defined Benefit Schemes such as NHS, Police, Teachers Armed Forces from April 2015.

mr luvpants

I have a UK Firefighters defined benefits pension which I paid into for 18 years. It is sitting in the UK still at the moment. What are the benefits of me moving it over here?

john in oz

Each person situation is different - For most the three main benefits are:

1. Moving here puts it in a Tax friendly environment when it becomes a Pension.

2. removal of funds from inheritance tax or lump sum death taxes on pension which are 40% and 55% respectively.

3. Access to your funds without any limitations once in pension phase and you meet the conditions of release.

I have PM you with a FACT which is down loadable as well in the original post above.

I hope that helps.

john in oz

As a Tax resident in Australia you are required to disclose and pay Tax on any UK Pensions that you are receiving ongoing each year from the UK.

You can elect to pay the Tax in OZ rather than the UK by completing a form from the link below and forwarding it to the ATO for stamping. They will then forward to the UK for you.

The above will see you be taxed in OZ only and reduce the amount of paper work you have to complete at tax time in both countries.

Link to forms is:

HM Revenue & Customs: Making a claim under a double taxation agreement

cheers John

kevnew1

Hello,
I am ex-RAF who receives a pension payment monthly and I have done for the last seven years bringing the funds over on an ad hoc basis when exchange rates suit my needs. I live in Australia and have arranged to pay all of my tax here in Australia since I emigrated. I am 48 years old.

So my question is as I receive pension payments already but I am not 55 years old how will the change in public sector pension legislation affect me as I am a bit confused with it all?? Can I or should I consider moving my pension to my Super fund here in Oz?

john in oz

If you are already receiving a pension then the changes will not normally affect you.

The changes affect those who have not accessed their UK pension Funds at the time it comes into affect.

There are very few pension providers who will allow you to convert your remaining pension funds into a lump sum and effect a lump sum transfer after you have already started a pension payment or annuity payment.

If the payment is from an unfunded government scheme then they will not normally allow you to convert existing/future pension payments into a lump sum.

Cheers John

john in oz

The following link explains in detail the different circumstances of the various taxes that may apply to someone who dies or is terminally ill whilst receiving a pension. You may be subject to a current tax of up to 55% of the fund value depending on the type of fund they have and the type of payment made or being received.

HM Revenue & Customs: Tax on a pension you pass on or inherit

It is currently proposed to reduce these taxes down to 40% WEF April 2015.

Everyone's situation is different and this may or may not be a major consideration in deciding whether or not to undertake a transfer.

Cheers

john in oz

Another factor to Consider when deciding on whether to leave your unfunded public defined benefit scheme like NHS, Teachers and NHS in the UK (some times known as frozen) is the returns you get.

Most of these types of funds simply increase your pension funds by the Consumer Priced Index (CPI) each year capped at 5%. Therefore the most it can increase is 5% each year.

At this time the average over the last 20 years of the UK CPI has been approx 2.2% !

In considering a move of funds to an offshore pension provider such as Australia you need to weigh up the returns that you will be getting in the UK with the returns you may get in OZ.

Obviously your age will make have an impact on your decision as well as being closer to retirement then the growth of the fund does not have as much impact as opposed to leaving it in the UK for 20 years.

Cheers

bobbyftm

Hi John, I moved to Australia in 2007 aged 45 then became legible for my MPS mine workers pension when I became 50 in 2011. My question is does the date of arrival fund for value purposes occur from 2007 or from when the pension became available to me aged 50 in 2011 to the present date to enable me to work out the earnings/growth factor. Would it be beneficial do you think to transfer it over to Australia or just access it from England if possible and pay the necessary taxes on an annual basis when I do my tax return over here in Australia. (Jeez I didn't think growing old could be so confusing ! )
Many thanks
Kindest regards
Ps how is it possible to find out the value of the fund whichever year it starts from

john in oz

We are all Getting Old too... Tax is based form the time of arrival in 2007 until time of transfer. It is not based on when you become eligible for a pension.

It is best to read up on the facts of a transfer to OZ in this forum and then if you wish to have a chat about the pros and cons then PM as a decision is based on many personal financial circumstances.

Cheers

sultry111

Hi John,

A couple of questions:

- what are the options for transferring pensions >$1m
- if I am to become 60 part way through the QROPS reporting period following transfer, what tax is payable on pension payments? For example, do I pay income tax on payments up to the age of 60 and then they are tax free thereafter?
- is there a limit as to how much I can withdraw before the age of 60 (according to GAD) or will the changes in UK pension regs post April 2015 mean that there is no limit on the amount but tax would be payable according to ATO tax rates?
- It appears that after 60, I may withdraw the whole fund tax free. Is that correct?
- can transfers be affected via 3rd party currency transfer providers e.g. transferwise?

Thanks

john in oz

Hi there is short as there is limited info on your circumstances and in this case best to PM with a poc to discuss in detail as too complex here:

a. anything over $ 540 K needs to be transferred in progressive transfers. This will depend on amounts you ages etc as once aged 65 then only 180 K per year can be moved into super.

b. Normal OZ rules apply so you may pay some tax on a withdrawal prior to aged 60 (if available at all). After 60 if a pension tax free.

c. The HMRC rules depend on when you left the UK and whether or not you are drawing funds within the 5 - 6 year rules for unauthorised payments.
Too complex via this means.

d. At this time legislation has not gone through and other than to say the governments intention is that the changes will also apply to QROPS

e. with OZ rules yet but it will also depend on the HMRC rules at the time and how long you have been outside the UK.

f. there are FX options through us so you can enhance your retirement savings substantially when compared to using the banks.

The above are general responses - you simply will have to contact me to discuss your circumstances - with amounts this large we we provide formal advice on it.

Cheers John

sultry111

Thanks John,
As a new member the site does not allow me to send pms. Will contact you via your website.