mark213

I have a complicated pension question I think.... wondering if anyone has come across this before.

My UK pension is a defined benefit (final salary one)... I have been offered a transfer to Australia with my existing company, but as a local hire in Australia. This means setting up a new defined contribution pension or accumulation plan with (9% employer contributions) with the local team. All fine so far.

In a normal situation I could transfer my uk pension to my new australian pension provider and have one only. I understand that this has to be done within 6 months to avoid tax issues.

Now comes the problem. My company have internal arrangement for those transfering from defined benefit to defined contribution plans abroad called a "Reciprocal Agreement" where:

On leaving service pension benefits in all countries where the employee has a retained benefit will be recalculated using a conversion of final or best average earnings as at date of leaving the ultimate participating company. The rate of exchange used to convert currencies will be the average of those in the past 12 months prior to date of leaving service. There will be no transfer of pension benefits – employees may receive pension benefits from several countries and in different currencies

This means that I cannot transfer my pension from the UK until i leave the company I am with and that could be years....

What is the tax implication of transfering it into Australia after 6 months if i were to do the Agreement above? Has anyone come across this before in their situation when migrating?

JAJ

If the pension is defined benefit have you thought about the pros and cons of leaving it in the UK?

thebears

The tax complication is after 6 months you are taxed on the increase in value of the fund. You therefore need a valuation for the date you arrived and of course their will be a valuation should you wish to transfer it.

The value now and the value of maturing benefit need to be compared. Basically you need to ascertain for yourselve whether you think after bringing it to Oz you can better that maturing benefit.

We have left 3 final salary schemes in the UK based on doing this comparison but also very relevant to the specific pension provider and rate of return being obtained.

Within the same company I have had both a final salary (UK) and 9% here in Oz

mark213

Thanks for that - makes a lot more sense. I was under the impresstion that the total capital was taxed and not just the increase. The rate is pretty good so will look in to it more.

OzTennis

Yep, as you now realise, it is the capital GAIN and not the capital itself which can be subject to taxation after the qualifying period has elapsed.

One day grandparents will be telling their grandchildren, like they do about dinosaurs and dodo's, 'I used to be in a final salary pension scheme'.

OzTennis