Plug

Hi Folks,

I have 2 company pensions left back in the UK, one of them is a final salary. I want to transfer the other one to my QROPS super here in Oz but I have seen many comments stating it's best to leave the final salary pension where it is.

Can someone offer an explanation on why this would be and how final salary is calculated if I no longer work for that company......

thanks...

JAJ

Your pension booklet should make that clear.

worzel

Very complicated, do lots of research, consult a specialist but the following is a start.

Australian pension - grows and paid in AUD but is invested in the stock market (can go down or up). Slightly more flexibility in terms of what you can do with it (like taking lump sums).
British (defined benefit) - you know how many GBP it will pay at the end as the company / scheme carry that risk. But instead you risk the exchange rate going up or down.

I have decided it is too difficult so left it where it is for the time being.

Wol

As a retiree on a final salary pension I didn't have the option of transferring anything to Oz, but I would have been very chary of doing it in any case. Apart from the potential tax implications of getting it wrong, you are exchanging a known pension (exchange rates excepted) for an unknown one. If I had years to run I would keep the UK one and build up Oz superannuation as well. Several irons....

Bix

There are other plus points to consider with the Aus Super:

You can choose at what level your money is invested - low, medium or high risk.
You can choose the type of things the money is invested in - property, currency, stocks, shares or mixtures etc.
With a reasonable fund you can buy your own investment property.
You can salary sacrifice into the fund for tax benefits.
The full amount of Aus Super remains the property of your family. It doesn't get reduced, swallowed and "lost" once you kick the bucket.

There is no currency risk (unless you are investing in currencies)

Many UK final salary schemes were in such a bad way that they were
closed to new membership and the schemes changed the earnings capability of the remaining members diluting their pension.

The final salary scheme guarantees the pounds already earnt but does not guarantee any growth on that figure once you have ended employment with the company.

I transferred my final salary scheme of 20 years against advice and am happy I did so. I paid no 15% Aus tax on the growth because there was none.....the UK scheme was not growing and I doubt it will for many years to come.

It is a tricky subject but IMO the UK final salary scheme is not as great as it is claimed to be.

woodiesinaus

Hi, I went to a Centerlink pension seminar, the food was good, and asked the expert who was there the same question. He told me to leave it in the uk without hesitation. His reasoning was that when you retire on Super you have a pot to invest/live off, say $150000 and that money will have to last you maybe 20/30 years. Not a lot of partying eh? However your final salary pension will never run out and should increase with inflation. This providing that your pension company doesn't do a Maxwell but on the hand stockmarkets have been known to crash.

Wol

Exactly. With a final salary scheme the company takes the risk of you living to 150. With superannuation, *you* take that risk. IMO it's good to have both.

TrickyTrev

Hi Plug

I have read on here previously that with a Final Salary scheme there is no off shore investment tax to worry about unlike a money purchase scheme where there is capital invested. I believe that this is the case because you do not have a fund value in a Final Salary scheme, just a promise to pay you £X at X age. Most schemes WILL increase your frozen pension benefits each year at least in line with inflation. This is where the potential for greater returns can sometimes look attractive by investing in an alternative pension based investment that offers this potential for returns over and above inflation!! The younger you are the more attractive this can look but..... you must always consider any other benefits that come automatically with your Final Salary scheme i.e. widows pension, dependants pension, death benefits etc etc etc!!!

** I AM NOT AN EXPERT - SO PLEASE CONSULT A PROFESSIONAL!! **

Hope this helps

Trev