We recently ran a webinar for Australian expats in the UK about how to access your super fund when planning to retire.
As well as expats, it will be of interest to British people who have lived and worked in Australia and, as a result, have accrued super fund assets.
It was hosted by our bdhSterling colleagues, Louise Duncan and Nick Bond, who are both experts in cross-border retirement planning.
It’s well worth watching, as Louise and Nick looked at a wide range of issues relating to retirement income planning, particularly if you have assets in a super fund back in Australia. They also spent time answering submitted questions on a range of financial planning subjects.
Here are six of the issues covered in the webinar.
1. How and when you can access your super fund
Even if you are a UK resident, the rules on when you can access your super fund are the same as if you were still living in Australia.
This means you will usually be able to access your super fund from age 60 if you have retired, or 65, regardless of whether you are still working.
You can currently access your UK pension from age 57, rising to 58 in 2028. This age difference creates an opportunity to plan for a regular income if you intend to retire early.
As you will probably be aware, you will not pay tax in Australia on income you draw from your super fund.
However, if you are a resident in the UK, it will be treated as income here and taxed accordingly, and you need to declare it on your UK tax return.
2. You may be eligible for Foreign Service Relief
If you have spent some time living and working in Australia since your move from the UK, you may be entitled to Foreign Service Relief (FSR) upon your return.
As a UK resident, FSR can significantly reduce your liability for UK tax on lump-sum withdrawals from your Australian superannuation.
This means your super fund may have both taxable and non-taxable elements, based on its 2017 value.
Calculations are often complex, and we recommend seeking expert guidance to ensure you access your funds effectively.
3. Tax-free income through the new Foreign Income and Gains regime
The UK government recently made a fundamental change to the taxation of citizens returning to the UK.
This means you are now assessed on your residency rather than your domicile.
One benefit of this change is the introduction of a new Foreign Income and Gains (FIG) regime. This gives you a four-year window after your return to the UK, during which all your foreign income is free from UK tax, provided you have been abroad for 10 years or more.
As was made clear during the webinar, this presents a potentially advantageous opportunity for income planning, as you may be able to repatriate your super fund to the UK without incurring tax.
However, you need to note that if you previously transferred your UK pension into your super fund, this portion won’t fall under the FIG regime and, as a result, may be taxable.
4. The importance of effective retirement income planning
Before you can start to put any detailed arrangements in place regarding your retirement income, Nick and Louise make it clear that you need to have an effective plan for your retirement.
Some of the points they outlined include:
- When you want to retire
- Where you intend to live once you stop working
- What you want to do in retirement.
They also stressed the importance of understanding how long your money will need to last, as this will help you determine how much income you will need to live on.
By using cashflow planning, we can help you consolidate all that information and develop an income strategy that accounts for external factors such as inflation and investment returns.
Read more – 4 key benefits of cashflow forecasting
5. Identifying various sources of retirement income
As well as your super, and any funds you have accrued in a UK pension, you may well have other assets that could provide you with retirement income.
These could include:
- ISAs
- Other investments and savings
- Proceeds from the sale of assets
- Rental income.
A key part of your planning process will be to identify these and consider how you will move Australian assets to the UK as tax-efficiently as possible. For this, it’s useful to understand the Double-Taxation Agreement (DTA) between the UK and Australia.
You will then want to ensure you have a secure, sustainable income, along with any lump-sum payments you may require.
Find out more – Your guide to understanding how the Double Taxation Agreement between the UK and Australia works
6. What happens if your plans change?
It’s hard to prepare for the unexpected, but if your plans change, you need to understand how this could affect your options going forward.
For example, you may plan to retire in the UK , but your circumstances may change, meaning you need to return to Australia.
While it’s clearly not possible to foresee this, it makes sense to retain some financial flexibility so that such a move can be managed without unnecessary disruption.
Expert advice matters
A key message both Nick and Louise stressed during the webinar was the importance of seeking specialist advice for your retirement income planning.
Working with an experienced advisory firm like bdhSterling can help you define your goals and identify what matters to you as you develop your plans.
Doing this will give you confidence and peace of mind that comes from having an effective strategy in place.
At bdhSterling, we specialise in helping clients navigate the complexities of financial planning between the UK and Australia.
If you would like to discuss your own retirement plans, please get in touch with us today.
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.