nipper

please can anyone give me some advice regarding pensions and endowments!! im a nurse waiting for my visa expecting to have final decision feb time 04, migrating with famly to oz. should i freeze superannuation or transfer it? dont want to cash endowments in but led to believe there are tax implications if they are left to run in the uk!!! im confused and any advice would be much appreciated.

Alan Collett

See the attached factsheet.

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Best regards.

Happy hammer

I was at the migration/property show at sandown the other week and asked an adviser the same question about my endowments. you will not be taxed on them as you are already paying tax on them already. if you think about it when your term is up you have a lump some to pay off your mortgage, you dont get taxed on it weather or not you give it stright to your lender of if it goes into your bank account. But what i will say is you will have to find out weather you have to declare it in oz as an asset/earnings. this is where an adviser will come in useful.:lecture:

Alan Collett

I take issue with that assessment. The life company may be paying tax on the investment income and capital gains that underpin the policy but you as an investor are not given credit for that tax when including the annual growth in the policy on your Aussie Tax Return (as required by the Foreign Investment Fund Rules).

Similarly in Australia there are capital gains tax issues to consider when the policy matures.

Bear in mind that the tax exemptions that applies to a qualifying life policy in the UK don't apply in Australia.

Best regards.

PaulDClark

Alan,

I'm actually going to get professional advice on this, but the FIF legislation appears to be quite horrendous, I, like many others will be in the position whereby we have a number of investments, mostly ISAs and bonds for the children which have lost a lot of money over the last few years.

It would appear that you would have to pay income tax on the increase in investment value from the date of entry, even though you have already lost money on them and they are not worth what was paid into them.

Is this right?

Paul

Alan Collett

Yes, that's the likely scenario Paul - the tax authorities in Australia usually aren't interested in any gains or losses you have made/sustained prior to your arrival ... which can work to your advantage if you have assets showing unrealised gains, but which is most unwelcome if your investments are showing losses in the period prior to your migration.

Best regards.

Gill and Rob

What if you just took endowment money on maturity, who would know?

Rob

Alan Collett

That's not a question you should ask of a CA Rob ... because it's tax evasion and is illegal.

Best regards.

Gill and Rob

What I was thinking is if you don't ask the question, you would not know. There apears to be a lot of contradiction and varying viewpoints as to whether endowments would be taxable. So if I could put it another way, is ignorance bliss?

Rob

dracupg

For what it is worth, we are PR in Oz and we had the following in the UK:-

Various Pensions (personal- SERPS contracted out, Executive Pension, Final Salary & Money purchase)
PEPs
ISAs
Small shares portfolio
3 x Endowment Policies.

After a lot of faffing around between various financial advisers in the UK and here, our conclusion is to get the lot into Oz ASAP (within 6 months of taking up residency).

As far as the Endowment policies are concerned, we are in the process of trying to convert these to fully paid up investments and leaving it dormant in the UK.

I have not come across a convincing argument yet to leave anything in the UK, except those offered by UK based financial advisers with an eye on their renewal commission.

Don

The most convincing argument for leaving a final salary pension scheme where it is might be if it is worth far more to you in the UK (whatever you decide to do wth the pension and however/ wherever it is taxed) at pension time than the benefit you could buy by transfering it to Aus now. Eg my final salary scheme would cost about GBP350-500K to buy on the market (depending on how you discount it and what you think is the equivalent t my scheme rules/ benefits) but the transfer value is only about GBP75K. 75K doesn't buy you a very good pension scheme in Aus and certainly doesn't buy the equivalent to my scheme.

Or you might consder that there is at least a possibility you could return to live in Europe by pension time.

Alan Collett

I agree Don - the decision as to what to do if you are a member of a final salary pension scheme is one of the most difficult, as the relative certainty of the pension income that comes with such a scheme (in UK£ terms) can outweigh the tax consequences of retaining your interest in it.

Then again the taxation of the scheme benefits is a factor that can be a significant reason to move such a fund to Australia, in that income deriving from a UK pension is taxable in Australia if you are a tax resident, whereas pension income deriving from the value of a UK pension transferred to an Australian super fund is usually largely tax free.

And the receipt of a lump sum from your pension fund at retirement age can trigger a section 27CAA tax charge on the lump sum in the tax year you receive it. Have a look here for more details, and scenario 4 on page 18 in particular:
http://law.ato.gov.au/atolaw/view.ht.../NAT/ATO/00001

Best regards.

dracupg

My final salary scheme wasn’t worth much having only worked a couple of years for the company and my leaving salary was squat, so it wasn’t really an issue for me. Easier getting it over here and centralising all the pensions in the one Super fund.