If you are a UK expat currently living in Australia, or you have plans to move there in the near future, you’ll no doubt appreciate that there are a multitude of financial issues to consider.
One of these will relate to your accrued UK pension fund. It’s likely that you’ve wondered what you can do with your fund when you move, as providing for your retirement will be one of your top financial priorities.
This is a particularly important consideration if you are planning to ultimately retire in Australia. It can be advantageous to have all your retirement funds in one place and in the same tax jurisdiction as where you’ll spend your retirement years.
One potential solution is to transfer your UK pension into an Australian super fund.
However, when it comes to this kind of international transfer, there’s no “one-size-fits-all” solution. Every individual’s arrangements will be unique, and there may be circumstances when moving your accumulated pension fund is not possible, or the right choice.
“Can I transfer my UK pension to Australia” is one of the commonest questions we can asked. So, read on to discover if you can, and six of the key issues around doing so.
1. Not all pensions can be transferred
Most UK-based pension arrangements and private pensions you’ve contributed to yourself can be moved to an Australian arrangement.
However, there are some exceptions to this, and you should be aware that the following schemes cannot be transferred to a super fund:
- Unfunded final salary schemes, such as the NHS pension scheme
- Any company pension from which you’re already taking a scheme pension
- Company pensions that are in the Pension Protection Fund (PPF)
- Annuities you’ve purchased with a life insurance company
- Your UK State Pension.
Note that, while your State Pension can’t be transferred, it can be paid to you in Australia. But you should be aware that it will not increase in value each year as it will in the UK.
2. There are potentially significant tax advantages
As you will probably be aware, you will have benefited from advantageous tax treatment on your UK pension contributions.
Provided that your contributions were within certain allowances, all your personal contributions will have had basic-rate tax relief added at source. You could have claimed higher or additional rates of relief through your self-assessment tax return if applicable, too.
Conversely, super contributions are subject to tax, but withdrawals from the fund can be tax-free after age 60.
So, by transferring your UK pension to a superannuation fund, you can create a highly advantageous tax position for yourself, benefiting from tax-incentivised contributions, and no tax on your retirement income.
You will, however, be subject to tax on the growth in your super fund between the date of your arrival in Australia and when the transfer to a super fund ultimately takes place, until you commence an income stream and then they grow tax-free up to $3 million.
3. You can transfer your accrued pension to an Australian arrangement
Once you are a permanent resident of Australia, you may be eligible to transfer your UK pension funds to an Australian QROPS (Qualifying Recognised Overseas Pension Scheme).
A QROPS is an overseas pension scheme that HMRC has officially recognised as being eligible to receive transfers from registered pension schemes in the UK.
Possibly the most important issue when it comes to transferring your UK pension to Australia is to ensure that the scheme you are transferring to has been approved in this way.
Without a QROPS registration, a UK scheme is not permitted to make an overseas transfer.
Once your new scheme has been approved by HMRC, you will be able to start the transfer process.
4. You may not be able to transfer your entire UK pension fund in one go
Contributions and transfers into an Australian super are limited by the Non-Concessional Contribution (NCC) cap.
The annual contribution cap is currently AUD $110,000, rising to AUD $120,000 in July 2024.
However, you may be able to make use of the “bring forward” facility, which allows you to bring-forward the next two years’ worth of your NCC cap. This will allow you to currently contribute up to AUD $330,000 in one year, and post July 2024, up to AUD $360,000.
Subsequent to this, you will then be able to transfer again once your capital limit refreshes.
5. Your age may prevent you transferring your fund immediately
If you are a permanent resident of Australia, you have to be 55 or over (rising to age 57 from 2028) to be eligible to transfer your UK pension funds to an Australian QROPS.
If you find you are not currently old enough to transfer, one interim option you may want to consider is to set up a self-invested personal pension (SIPP) in the UK and transfer your funds into this single arrangement.
Not only will this give you full control of your investments and mean that all your pension funds are in one place, but it may also enable you to start to invest your pension assets in some Australian funds.
Once you reach the required age, you can then transfer your SIPP into a QROPS.
Furthermore, setting up a SIPP in this way can help you manage the transfer of your UK funds to your QROPS within the non-concessional contribution cap as outlined in point four above.
6. Transferring is not always the right thing to do
Even if you are able to transfer your pension funds, it’s particularly important to be aware that it may not be the right thing for you to do given your individual circumstances.
For example, you may discover that the cost of transferring your UK-based pension fund could be prohibitively expensive, especially if it is relatively small.
More crucially, you may be unsure as to where you’ll be living in the future. If that’s the case, and there’s a possibility that you may return to the UK to retire, then transferring your pension funds may not be the best course of action.
Regardless of your circumstances, it’s essential to get expert advice before you do anything. The transfer process can be complex, and mistakes could prove costly and potentially irreversible.
Get in touch
As you’ve read, expert advice when it comes to transferring your pension is important. bdhSterling are widely recognised as the leading experts in UK to Australia pension transfers. If you want to discuss any of the issues you’ve read about in this article, please get in touch with us.
You can also find out more about transferring your UK pension in our guide on this subject.
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. 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.
