gle

Stop yawning
I have finally taken the plunge and have a stakeholder pension. I intend to leave for aussie within a couple of years, for several years (if things work out of course). With this pension I can contribute (as long as the money comes from a UK bank account) for up to 5 years. :lecture:

Does anyone in Aus contribute to a UK pension. Are their any benefits/costs that can be had while working in Aussie in term of pension contributions?

It seems straightforward: I transfer money to UK account and thence to pension simple eh? There is a downside somewhere.

crabtree

There is a down side.
You currently receive tax relief at your highest rate and you can not get tax relief if you are not a uk resident.
I would also check with your adviser that you can still contribute if you are no longer a uk resident.
Also check to see if there are tax advantages if you take out an Australian Pension.

Tony C

gle

Oh I see the money the tax man put is (12.5% or something) is withheld if one is not ordinarily resident in UK?

>You currently receive tax relief at your highest rate and you can >not get tax relief if you are not a uk resident.

The helpline for my Pensions said that I could pay into my pension for upt- 5 years if I moved to australia - I guess he neglected to say that I would lose out on the Gov's contribution.

I will ask them again loaded with the question and post the reply.

pickletheplacid

Do you not have to pay some kind of exchange rate charge. Does the pension company take Aus dollars.

pickletheplacid

gle

The pension provider will receive my money by me transferring money from a UK bank account (has to be a UK account). Of course the exchange rate will affect the timing of my contributions but it appears that the biggest disadvantage of maintaining a pension in UK is that the UK tax man will not put in his 12.5% as is the case if one works in UK.

I am new to pensions. Maybe this is a bit of a non-issue. Just keeps thing neat , i.e. having not separate pensions across continents.

crabtree

Its not 12.5% tax relief.
Its your highest rate either 22% or 40%.

Tony C

gle

Okay I have spoken to the pensions people and they say that I can continue to contribute to a UK pension from abroad for 5 years on the condition that I was a resdent when the pension was created. Further, the percentage the tax man contributes continues for that period.

UDS

The problem is not at the UK end. You will still receive your tax credit in the UK for five years after you leave.

The problem is at the Australian end. Depending on the circumstances - and you will probably need professional advice here - the UK pension will probably be regarded as a "foreign investment fund" and you will be taxed every year in Australia on the growth in the fund. Not just every year for which you contribute, but every year for which you hold the fund. The fact that it is a pension fund, and that you cannot take money out to pay the tax, is irrelevant. You will still be taxed.

So plan this carefully. It may still make sense. You may be able to bring your case under one of the exemptions to the FIF rules, or you may decide that, given the UK tax credit, it is still a good deal. But it's not straightforward.

gle

Thank you all for your replies.


If and when I get to Aus I intend to still retain a UK bank account with much of my initial savings. I know I must be naive here but how will the Australian tax authorities know where I transfer my money to: all they can be aware of is that I occasionally transfer money to UK account; they will surely be ignorant of the fact I may then transfer the money from my uk current account to a pension fund.

Is it the case then that when one obtains an 'NI' number from the aussies my financial details are passed through to aus?


God I am ignorant.

UDS

Unless you're prepared to lie when completing your tax return - never a good idea - they will know about it from your tax return.

There are also arrangements in place for information sharing between the UK and Australian revenue authorities. I don't know how these work in practice, or whether they mean that there is a likelihood, or a chance, that the Australian revenue would find out about your UK pension even if you did omit it from your tax return.

Finally, if not sooner, they are likely to find out about it when the pension comes into payment, and payments start to come to you.

gle

If I have investments such as a pension that I stop paying into could they claim tax from that or is purley investments while resident in australia?

UDS

If you hold a pension fund overseas, and if it is regarded by the Australian revenue as a "foreign investment fund" then you are taxable every year on the growth in value of the fund. This applies every year you hold the fund, regardless of whether you contribute to it in that year or not. It is the growth in the whole fund which is taxed, including the growth in the part of the fund which you built up before becoming resident in Australia.

gle

It must be a cut and dry case regarding pensions, is it not? Does the Auss Taxman regard pensions as a "foreign investment fund".

Is anyone here in this situation? Does anybody have an idea of what the % is?


Perhaps I should stick to run-of-the mill uestions like whats the whether like in Brisbane compare to Sydney.

Thank again for replies up to now - I do appreciate them.

UDS

It's not quite cut-and-dried. There are a couple of exemptions which might get you off the hook.

If the total value of your UK pension fund, and of any other Foreign Investment Funds you and your family have, and of any holdings you and your family have in Australian unit trusts, is less than $50,000, then you don't have a problem (the "small investor exemption").

If your UK pension fund is an employer-sponsored fund, you don't have a problem (the "exemption for employer-sponsored foreign superannuation")

If you think you might come in under one of these exemptions, you really need to get local (Australian) advice to be sure of the position.

You have until six months until after arriving in Australia to move your pension fund to Australia, so you can wait until you arrive and then get advice and take a decision about moving the fund.

gle

Okay thanks, things are much clearer: I would be classed as a extremely small invester but shall seek professional advice if and when I get to aus and update this thread in a couple years' time.