10 top tips for cross-border financial planning in the UK and Australia

Category: News

Living a cross-border life in two different countries is the dream of many. You can experience all the positive social and cultural benefits of two different regions and create a flexible lifestyle for yourself and your family that could be massively rewarding if you get it right.

There are a series of challenges you need to address, however. This article lists 10 of the key issues that you should consider when it comes to planning your cross-border finances.

1. Planning your income in retirement

Make sure you have a retirement plan in place. You can amend this plan as your circumstances change, but the key aim should be to at least have an outline covering the following points:

  • When do you want to retire?
  • Where do you want to spend your retirement?
  • Once you have retired, what do you intend to do?
  • How long will your money need to last?

The answers to these questions will form the outline of your retirement plan and help guide and inform your retirement planning process.

2. Anticipating day-to-day financial costs

Be aware of your income and expenditure. If you are spending time in two different countries with income and expenditure in both, this becomes even more important.

While you can’t predict exactly what will happen in the future, you should take note of anticipated commitments, such as university fees or moving costs if you know you’ll be moving in the future.

This will help assess and manage your financial priorities, especially as you get closer to retirement.

3. Looking ahead at your finances

As well as your current cashflow, it’s worth taking time and working with a financial expert to look at cashflow forecasting.

In this process, a financial adviser will use a sophisticated tool to map out certain “What if?” scenarios, both positive and negative, based on your current financial circumstances. These scenarios can include different inflation and investment returns, including possible dramatic changes to either.

Doing this helps you review the robustness of your finances, and what changes you might need to consider making.

4. Strategies for your pension planning

The UK and Australia have different tax regimes when it comes to saving for your retirement.

In simple terms, you get tax relief as money goes in when you pay into a UK pension, and do not pay tax when you take money out of your super in Australia.

These differences can make planning for your retirement complicated, but also create certain clear advantages that you should look to maximise, as far as your circumstances allow.

5. Transferring your pension funds

If you have accrued pension funds, you should be aware that you are not able to transfer your Australian super to the UK, so will need to make the necessary arrangements to draw from your fund within Australia.

It is possible to transfer some UK-based pensions to Australia, and it can be very tax-efficient to do so. However, the process of transferring is not straightforward, and we would strongly recommend seeking advice and guidance from an experienced financial adviser before doing this.

You should also be aware that unscrupulous financial scammers are constantly targeting Australians with overseas pension entitlements, which makes using a qualified financial adviser even more crucial.

6. Considering all your sources of retirement income

Once you have decided when you want to retire, you should start identifying where your income will come from.

It’s likely that you’ll be drawing your retirement income from different sources – not necessarily just pension arrangements, especially if you have assets in both the UK and Australia.

You should look to work with an experienced financial adviser to develop a flexible income strategy to minimise your tax liability.

7. Your State Pension and Age Pension

As well as any pension savings, you should also consider the respective pensions provided by government. This is the State Pension in the UK and the Age Pension in Australia.

While neither are likely to provide you with enough income to live comfortably, they both give a useful guaranteed income that should at least cover some of your essentials.

You should ensure you understand how much you’ll get in each case, and when.

8. Use of investment tax wrappers

We have already considered your pension arrangements, but, as well as pension funds, you could have substantial other financial assets split between the UK and Australia.

It’s important that you manage these as tax-efficiently as possible, particularly if you have to move them between different taxation jurisdictions.

So, planning, and financial advice are both crucial to ensure you maximise the tax advantages and avoid any pitfalls that could end up costing you money.

9. Making sure you have valid wills in place

As well as future income and financial planning, you should also take steps to ensure that your loved ones are protected in the event of your death.

Potentially having assets in both the UK and Australia means you should ensure that your will is set up correctly so that it’s acceptable in both countries.

Although both countries do recognise the terms of wills drawn up in the other, it’s often advisable to have a UK will for your UK assets, and an Australian will for assets there.

10. The value of advice

A dual-country, cross-border lifestyle can be rewarding to live but challenging to set up.

As you will have realised from reading this article, there are a whole series of issues where we would strongly recommend that you get advice from a financial adviser with experience in these types of arrangements. At bdhSterling, we’re here to help you with these sort of requirements so get in touch to find out how we can help you.

We’re able to help you put a robust and detailed plan together making sure you cover all the issues you should and help you to avoid any potential pitfalls.

On 13 April, we’re hosting a webinar on living the transatlantic life and would love for you to join us. Keep a look out in your inbox and on social media for registration details.