As an expat Brit now settled in Australia, you’re likely to have pension savings both here and in the UK.
It’s important to be aware that different rules and regulations apply to how and when you can take income from your funds, and you’ll need to take this into account when considering when you want to retire.
It’s therefore advisable for you to start planning for your retirement if you haven’t done so already. And even if you already have plans in place, then it’s equally worth taking the time to review then and check they are still on track.
To help you, here are eight tips if you’re planning to retire in Australia.
1. Make sure you have a plan
The first step to a successful retirement is having a plan in place.
As a starting point, the answers to the following questions will provide a decent basis from which to start putting your plan together:
- When do you want to retire?
- What do you want to do once you have retired?
- What legacy do you want to leave for your family?
- How long will your money need to last?
You should also map out your current cashflow, including details of all your regular income and outgoings.
Also include details of all your outstanding debts, credit cards, loans and so on, with a plan of how you will pay these off before you retire. Target the highest interest debts first.
2. Get valuations of all your pensions
It’s likely that your pension arrangements, both in Australia and the UK, will provide the bulk of the income you’ll live on in retirement.
You should therefore put together a schedule of all your different pension holdings so you can see exactly what you have.
Your schedule should include:
- The current value of all your funds
- A projected value at the date you are looking to retire
- The way your current funds are invested.
3. There are big advantages in transferring your UK pensions to Australia
It’s worth noting that you can transfer your UK pensions to the Australian superannuation scheme and access them tax-free at retirement.
This creates a very advantageous tax position. You will have already received tax relief when making contributions to your pension fund in the UK. Now, you will be able to take income without paying tax.
It can therefore make sense to transfer your UK pensions to Australia if you’re planning to retire in Australia permanently.
Note that you can only transfer your UK pensions to super once you have reached age 55, and transfers are subject to scheme contribution limits. There are also restrictions on the types of scheme that you can transfer.
You can start taking benefits from the scheme from age 60.
4. Don’t forget other sources of income
In addition to pensions, you may have other investments which could provide an income. These might include:
- UK Individual Savings Accounts (ISAs)
- Other investments such as managed portfolios and shares
- Buy-to-let property
- Onshore and offshore bonds.
When you retire in Australia it’s likely you’ll be in the situation of having assets in both the UK and here. Deciding where to take income and capital from, and when to take it, isn’t straightforward and you should plan this carefully.
5. How you invest is important
How you invest your pension and other savings can make a big difference to the ultimate amount of money you’ll have when you come to retire.
Different types of investment have different levels of investment risk. You’re likely to get greater returns from higher-risk investments but they can also be more susceptible to short-term volatility and sudden loss.
So, you need to ensure your investment holdings are appropriate to your aims and time frame.
6. Make sure you are as debt free as possible
It will be much more difficult to repay any outstanding debts you have after you stop working, as it’s likely your regular income will fall. This means that it’s essential to put a debt repayment plan in place as soon as possible – and to stick to it.
Focus on paying off the highest interest debts first, and then rolling over the monthly repayments onto other debts to clear them as soon as possible.
Once you have cleared your debt, think about diverting the amount you were paying each month into savings to increase the amount you have available when you retire.
7. You’ll need to plan moving UK assets to Australia
If you are planning to retire in Australia, and likely to remain permanently, you’ll probably want to transfer some or all of your UK assets.
With two different tax regimes to consider, and assets under both, it’s essential that you manage the movement and disposal of assets carefully. If you don’t, you might end up with a hefty tax bill that could easily have been avoided.
For example, disposal of UK assets while you’re resident in Australia could result in Australian Capital Gains Tax (CGT) being payable. Unlike the UK, there is no CGT allowance, so planning around the timing of disposal of assets is crucial.
8. Importance of financial advice
As you will have realised from reading this guide, planning your income in retirement is not straightforward, particularly if you currently have assets in both Australia and the UK.
That is why we would always recommend using a financial adviser.
Get in touch
At bdhSterling we have licences in both the UK and Australia for full financial planning and can help you develop a clear plan.
Get in touch to find out more.
Please note
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.
