As an Australian living and working in the UK, at some stage you will need to make the important decision of where you plan to spend your retirement years.
You may have already decided that you will be leaving the UK at this time and spending your well-earned retirement back in Australia.
Alternatively, you may feel that you have set down deep roots in the UK and will be happy spending your retirement as an expat.
Regardless of what you decide, it’s important to bear in mind that a successful retirement takes careful planning. There will be important decisions you will need to make, such as where you want to live, and where your retirement income will come from.
Read on to discover six of the key issues you need to bear in mind if you are planning to retire in the UK.
1. It’s essential to have a plan for your retirement
As you have already read, the key to a successful retirement is to leave nothing to chance, and to have a robust plan for it.
So, if you don’t have one already, your first step should be for you and your spouse or partner to start putting such a plan together.
To begin with, set out what you intend to do when you stop working. This will include any travel plans you have, where you want to live, and the type of lifestyle you have in mind.
Using this information will give you an idea of how much income you will need, and whether you are in a position to be able to retire in a comfortable financial position.
2. Assess your current UK pension arrangements
Once you have an idea of how much income you believe you will need, you will then need to assess where that income will come from.
If one or both of you have been living and working in the UK for some time, you are likely to have retirement savings in one or several UK pension funds.
You should ensure you have details of all your plans and retrieve up-to-date values for each. If you have lost track of any pension assets, the UK Pension Tracing Service can help you find details of these, to enable you to contact the scheme administrators and access your funds.
If you have a series of different pensions, consolidating these into a single arrangement could help you manage your investment and retirement income strategies, rather than having a series of different plans to keep track of. This said, it may help to speak to a financial planner about your options before consolidating.
Finally, as well as your respective pension arrangements, you may well also be entitled to a UK State Pension. While this will not provide you with enough to live comfortably on, it’s a guaranteed regular income, that will increase each year in line with the higher of inflation, wage growth, or 2.5% if you live in the UK.
To get an idea of how much State Pension you will receive, you can request a forecast from the government, which will also tell you when you will be able to claim it.
3. Consider the best way to access your super from the UK
Once you’ve traced all your UK-based pension funds, you will also want to understand the value of assets you have back in Australia in super fund assets
Again, you will want to obtain up-to-date values of all super funds you have. As with your UK pensions, you may need to trace any funds you have lost track of. You can do this through the lost super search line that the Australian government set up in 2019 for this purpose.
It’s important to bear in mind that you won’t be able to transfer your super funds to the UK. However, there are various options available to enable you to draw income and lump sums from your super in a way that can help mitigate the amount of tax you will be liable for.
We would strongly recommend you seek expert advice before you do this, to ensure you aren’t faced with an unexpected, and potentially avoidable, tax bill.
If this is of interest to you, then join our upcoming free webinar, ‘What to do with your superannuation if you’re an Australian in the UK’ on 8 November . You can find out more and register here.
4. Review all your other assets
As well as all your pension arrangements in the UK and Australia, you should also consider other assets you have, in both countries, that can supplement your retirement income, and any lump sums you may need.
These assets could include:
- Investments such as a portfolio of funds and individual shares
- Money in saving and investing accounts such as ISAs
- Any businesses you own or have an interest in
- Property in both the UK and Australia
- Offshore and onshore bonds.
You may also want to consider any potential inheritance you believe you may benefit from in the coming years.
5. Access assets you have in Australia
A crucial part of your retirement planning process will be deciding how and when you’re going to access your assets to fund your retirement, particularly those in Australia.
This will primarily depend on your plans, and whether or not you have any intention of returning to Australia at some stage.
Again, we would strongly recommend you get expert advice from a tax specialist to ensure the process of vesting and transferring these assets is conducted as tax-efficiently as possible.
And, as you may well be transferring substantial sums of money, we would also recommend you use a currency exchange specialist to make sure you get the best possible rate for your Australian dollars.
6. Understand if you have sufficient assets to fund your intended retirement
With an idea of your plans for retirement, and a schedule of all your retirement funds and other assets, you will now be able to gain a clear idea of whether you have enough to afford everything you’re planning to do.
By doing this before you actually stop working, you will give yourself the opportunity to boost your assets before you retire if your planning highlights a mismatch.
For example, you may feel that you’ll need to work longer to help boost your retirement fund before finally stopping work.
As an alternative, you may want to go through a gradual retirement process rather than simply stopping work one day and starting your retirement the next.
This could involve working fewer hours, or moving into a consultancy role, rather than stopping work completely.
As well as putting less strain on your retirement assets, this also has the advantage of helping you adjust to retirement over a period of months, or even years, rather than abruptly.
Get in touch
Regardless of where or how you intend to retire, it can help to have someone working for you who understands all the issues involved when it comes to planning your retirement, and who can help you avoid potentially expensive mistakes.
At bdhSterling, we have a wealth of experience in helping clients with their financial planning, particularly where they have assets across both the UK and Australia.
Get in touch to find out how we can help you.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only, it does not take into account your personal objectives, financial situation, or needs. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances.
All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.
