plucka

Hi,

When permanently moving from the UK to Aus what happens to your UK private pension contributions. Can you withdraw the cash or do you have to transfer it to an AUS superannuation fund?

Alan Collett

Hello Plucka.

So long as you are receiving earned income in Australia you will probably have the choice of transferring your UK pension fund to an Australian super fund, or leaving the pension fund in the UK (in which case you will receive an income when you reach retirement age).

There are some important tax issues involved in each route though - which is where I start earning my crust ...

Feel able to mail me directly if you want more details.

Best regards.

jumbo

What proof of earned income is required and by whom?

gld

I posted the following about Hidden Costs which you may have missed.

Its case by case determination what you do you cannot generalise. And the answer is not clear cut - have you seen the amount of legislation there is in UK and Australia on retirement planning alone? If you are best advised to move it and the answer is if then.....

Hidden costs in pensions can be controlled by exercising prudent planning pre-departure. The first 3 alone account for 6% of fund value for starters.

• The hidden costs of bank charges on transfer, (Factor in 2% of fund value – it should be 0%) – its incredible how much is lost at this stage;
• Uncontrolled exchange rates – what rate will the receiving scheme change your money at? (4% Variance is common from the Inter-Bank rate – 1% is what it should be)
• The cheque which is sent and not the electronic option, you better believe it (Factor in 1% of fund value – it should be 0%)
• The avoidable tax charge caused by missing the 6 months if a pension should be transferred – surface post, the wrongly addressed cheque (Potential of maybe 3% loss in value)
• The not merging of benefits where appropriate pre-departure, (increased handling costs – difficult to quantify as to the % loss but we estimate 2%)
• The reduction of charges from the exiting scheme, (scheme by scheme depends on when the transfer took place – no % stated due to the variance factors)
• The managing of compensation issues pre-departure due to the potential tax impost and the grossing up provisions, (another difficult one to judge – but case by case examination necessary)
• The not offering to protect a fund against the exchange rate fluctuations, (could be 15% - e.g. we had a very happy client transferring funds at A$2.90 when rate was A$2.45 – he was not alone) what rate do you switch your pensions at?
• The lack of knowledge of re-basing provisions, (could be 3%) – its the pre-six month switch.
• The UK IHT issue on pensions, (40% of Value)
• Etc, etc.

These hidden costs are ones which an Australian based advisor will invariably try to shy away from – unless he or she has a UK counterpart who is co-ordinating the pre-departure planning. Those of us who handle UK pensions for migrants or make recommendation as to which advice route to take should always consider the above effects,

We face complications such as the following (on the other hand clients meanwhile face the consequences of the costs of the above by delaying advice):

It can take months to get pensions into the right shape for departure to minimise the above exposure to loss. Because of the six month rule the pressure is on to get moving as it is pre-departure planning that gets the costs down. Once you leave UK, time is against you – but a signature can be turned round by driving to a location if you happen to be in the UK, but if you are post departure it just adds a good week in each direction for mail to turn around, if for example original signatures are required – watch that six months. Hence why because of some of the above cost issues, there may be no real option but to recommend (in our capacity as advisors) a client to delay a departure.

It goes without saying that to action the above, reality says you need to be UK regulated with the necessary UK based service providers and facilities and qualifications to handle the above pre-departure with Australian based advisors linking in who understand the above financial planning techniques.

Geraint Davies
www.miplc.co.uk

Kentish Man

A lot can depend on the type of pension policy you have. For example you might have a single charge (or stakeholder) Personal Pension. In these cases the only charge is a 1% annual management charge regardless of whether you are contributing therefore there's no harm in keeping them where they are for any length of time. Best thing to do would be to write to the insurance company and find out what the annual charges are for the policy with no contributions going in and what the transfer value might be.

gld

The Stakeholder is more than likely caught under the FIF and 27CAA provisions in Australia - i.e. tax assessed in Australia pre-retirement.

The advice to set this up may be flawed - paryicularly if your stakeholder is tax assessed in Australia - even if it remains in the UK.

Hence my thread on hidden transfer costs

Hope this helps


Geraint

PS Happy New Year

bondipom

Geraint I have a suggestion for you. You will find yourself constantly answering the same questions and maybe you should provide some public information and an faq (frequently asked questions) area on your website.

You will then draw more traffic to your website and drive more business through it. At the moment it only seems to want our details for no return.

Ben.M

Does this 6 month rule only apply to Oz or does it also apply to NZ? Six months from when? First arrival or does it depend on your visa type/status?

Thanks,
Ben

Philanthropist5

is there a general rule of thumb for local govt. schemes/final salary schemes about whether to transfer or not?

sean

gld

We did take a view on this which we should review - we found ourselves caught in a bit of a trap - we see so many different situations that we feared that the use of FAQ's could lead to a flood of DIY's - in which case we would have to go into far greater detail - that greater detail could be of incalcuable benefit to anybody who is in competition with us or who wanted to be.

We concluded that due to the complexity of the issues FAQ's could be applied to a situation and misinterpreted by a DIY Migrant - which could have adverse consequences.

There is also indeed a history of interested parties wanting that greater detail for their own commercial interests.

I will discuss it with the Board

Thanks for your comment, it will be taken seriously.



Geraint

gld

Ben

NZ is different and it depends on your passport, type of pension and a different FIF - there is no six months. Kiwis in UK have invariably got mis-sale issues.

As I always say advice is necessary in advance of departure.

Happy New Year


Geraint

See www.miplc.co.uk

gld

Sean

There is no general rule - you only have to look at the UK pension transfer scandal to see why. Each and every case needs to be examined within the context of your circumstances.

If it is right to move then the process of planning should start as soon as you apply for your visa.

I am happy to discuss this with you if you want to give me a call have a look at our web site for details. There is no fee for an initial discussion over the phone.

There could be other issues.

Happy New Year


Geraint

www.miplc.co.uk