Advice for UK Pension Transfers: Should You Transfer Your UK Pension?

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If you are currently living in Australia there is no obligation to transfer your pension.

However, for many people there are clear advantages in transferring your pension scheme. A number of issues including taxation, currency fluctuations, local legislation and constantly changing pension rules mean that it can be beneficial to transfer your pension out of the UK into a QROPS.

Having a UK pension income paid to you while you are abroad raises a number of potential problems. Firstly, you will need to think about the factors surrounding currency exchange. If you are living and spending money in a country outside the UK, during retirement, then you will be buying goods and services in the local currency. For peace of mind, it may be an advantage to have a pension paid in the currency of the country where you are living via a QROPS.

There are also differences between QROPS schemes in different countries. For example, different rules govern when you can access the tax-free lump sum, and how much you can take as income when you start to draw your money.

Therefore, it is important to take expert advice from a Financial Conduct Authority (FCA) regulated advice from a licensed adviser who understands the market and the regulations. 

If you do decide to transfer your pension, your UK pension fund manager will need to be sure that the scheme into which you plan to transfer the money is indeed an HMRC registered QROPS and is on the list of approved schemes.

If you are under 75, there will also be a check to establish whether your pension fund exceeds the lifetime allowance for pensions savings, which for the 2018-19 tax year is £1,030,000.

If the total amount of your pension to be transferred is more than the £1 million lifetime allowance permitted by the UK, then any amount in the fund that is more than £1,030,000 will be taxed at 25%.

When you are considering whether or not to transfer your pension, it is a good idea to consider your own needs, financial circumstances, estate planning issues and future plans. Is there a chance you could return the UK and want to draw an income there?

By making the transfer into a QROPS the benefits could include:

  • More flexibility
  • Greater investment choice
  • Taxation advantages
  • More freedom to use your fund in the way you wish
  • Protection from currency fluctuation
  • The ability to pass the remaining assets onto your heirs when you die
  • All your pension assets in one place – this is particularly true if you decide to consolidate all your pension schemes into a QROPS scheme.

Taking advice

Although there are significant financial and tax benefits to be had from the transfer of your pension, it is important to obtain professional advice to determine the best option for yourself.

Additionally, if you possess a UK pension with a fund value of £30,000 or higher it is now a legal requirement for you to obtain FCA regulated advice before a transfer can take place to avoid significant penalties.

If you are considering whether to transfer your pension to Australia, contact bdhSterling for more information.

Australian Seminars

If you currently live in Australia and wish to learn more about transferring your pension to Australia please feel free to attend one of our complimentary seminars we are hosting in Perth, Sydney and Melbourne on the below link.