fitz

Hi,
has anyone turned 55 and cashed in their UK private pension
just wondered about how much tax you pay
both in the UK and Australia
i have a rough idea but I’m a little bit confused
i have a workmate who transferred over 40,000
straight to their bank account and didn’t mention this to ATO
nothing ever came of it he tells me
i also read that if you don’t live in the UK then the 75% of your
pension that can be taxed is less
not sure what to believe
but will be doing it by the book
any help or info appreciated

Kooky.

You might benefit from making an appointment with and talking to Pensionwise - it's a free advisory service offered by the UK gov. I did when I turned 55 and all my pension letters started arriving, bombarding me with options.

My life took an unexpected turn - a move from Oz to US - and I ended up doing nothing, but the guy did suggest I could cash mine out over several years to minimise the tax liability. (I have about 150k sterling so when the time comes I will definitely be looking to do this.)

Alan Collett

My view is that there is probably an Applicable Fund Earnings consideration here, with fund growth since the date you became a tax resident of Australia likely to be taxable and required to be included on your tax return.

There will be a Tax Treaty form to be completed, otherwise UK tax is likely to be withheld under PAYE - this tax may be more than the tax that is payable on the AFEs.

Maybe have a conversation with one of the specialist financial advisory firms that work in this sector - I'd have a chat with bdhSterling, but I say this as a Principal at bdh Tax.

You are welcome to contact me directly too, via a Private Message.

Best regards.

chrisBchicken

Hi Fitz

Did you ever seek further information on the tax situation for your UK pension?

Im in a similar situation but have a UK based SIPP, I drew £12,000 from the fund last year and was mortified when the fund managers deducted tax at an emergency rate, almost £4000!!! I managed to get it back some nine months later. I mentioned this to ETax when I lodged my return, but they said I wouldn’t need to declare it as it was still in my UK bank account.

I hear that a UK tax specialist in Australia will charge around £3000 to assess the tax implications of drawing future funds, perhaps someone with some knowledge of this could confirm?

Alan Collett

I hope they have good PII ...

Your liability to tax in Australia is likely to be driven by your residency status, and whether the amount drawn - ie the $12k - is considered to be a lump sum or a recurring sum (= a pension).

Best regards.

Alan Collett

PS. Feel able to contact me at bdh Tax if you would like a freebie high level chat.

Best regards.

chrisBchicken

Hi Alan

I’m a permanent resident, the £12,000 was a one off withdrawal, although I had already taken my 25% tax free lump sum in 2018.

All I want to do is the right thing, I’ve been advised that I will only pay nominal tax on any growth since I stopped paying into the fund since 2014, but I’m not sure this is reliable advice.

I’ll take you up on that chat, thank you!

Alan Collett

OK - thanks.

Is likely the taxable income in Australia is equal to the Applicable Fund Earnings (AFEs) attributable to the £12k.

Speak soon!

Best regards.

chrisBchicken

Is it best to contact you through BDH Tax? If so, which office?

Alan Collett

Maybe send a PM to me with your mobile number (click on my name to the left of this post)?

Otherwise you can reach me through any of our office numbers; if you do this say to the receptionist that you were discussing the taxation of a pension lump sum with me on the British Expats forum.

Best regards.

Kiwipaul

I've a UK pension from a company that I worked for from 1990 to 2000. I retired in 2014 and it's been paying me $1,000 a month since, no UK tax paid (once I got paperwork sorted) but I declare it in Oz and so far I've not had to pay any tax as my investment income is below the tax threshold.

My Oz super is tax free anyway and so it worked for me leaving it in the UK and it's cost me nothing.

Alan Collett

Noted - this highlights the difference between the taxation of a lump sum and the taxation of an income stream.

Best regards.

DunRoaminTheUK

Is the rule of thumb then? Once you turn 55 you can access your UK pensions funds? Is this only for private funds as I contracted out of SERPS way back in the day?

Cheers.

Alan Collett

Please - take professional advice.

The tax at stake - and that can be saved with good advice - can be significant.

Best regards.

FavouriteFlavia

When thinking about pension is worth taking into consideration estate planning.
My partner has a big pot in a private pension scheme in the UK, he is over 55 and we've been in Aus for 10 yrs and we're planning to stay here.
As I'm a stay at home mum, I worked for only 8 years in the UK and I'm only in my early forties.
As things are now, if anything happened to my DH, I would only receive 50% of his UK private pension. Even worse, if anything happend to me as well, our kids wouldn't get anything from that fund.
So we're planning to eithe put this UK defined Benefits in a UK SIP or bring them across to Aus in either a QROPS SMSF or IVCM, the only retail fund that at present is QROPS. In this way if anything happened to DH I would still receive 100% of his pension and further down the line, when anything happens to me, the money would be passed on to our kids through a trust.