As a financial advice firm with offices in both Australia and the UK, who specialise in helping clients with the financial aspects of moving from one to the other, one of the most common questions we’re asked is: “Can I transfer my UK pension to Australia?”
This is an important consideration, especially if you have accrued a substantial pension fund in the UK and are now planning to retire in Australia.
The answer to that question will very much depend on your personal circumstances. Indeed, there may be a case not to transfer your accrued fund to Australia, even if you can. However, in some cases transferring your fund can offer significant advantages.
In this article, we have set out six important points that will help you understand whether you are able to transfer, and the practicalities of how you can go about doing so.
1. You may not be able to transfer your pension to an Australian scheme
Most UK-based pensions you’ve contributed to yourself can be moved to an Australian arrangement.
The main exceptions to this are:
- Unfunded final salary schemes, such as the NHS pension scheme
- Any company pension from which you’re already taking a retirement income
- Company pensions that are in the Pension Protection Fund (PPF)
- Annuities you’ve purchased with a life insurance company
- Your UK State Pension.
You should note that, while your State Pension can’t be transferred, it can be paid to you in Australia. However, be aware that it will not increase in value each year as it does in the UK.
Find out more: 7 helpful facts about your State Pension if you are living in Australia
2. Your age may prevent you transferring your fund immediately
The second factor that may prevent you transferring your UK pension to Australia, at least for a certain length of time, is your age.
Even if you have been a permanent resident of Australia for some time, you need to be 55 or over to be eligible to transfer your UK pension funds to an Australian arrangement. This age requirement is rising to age 57 in 2028.
However, assuming the pension in question is eligible to be transferred, you will only have the inconvenience of having to wait until you are old enough, rather than being prevented from transferring totally.
If you are in this position, you may want to consider transferring the pension(s) you want to transfer into a single, self-invested arrangement. This will help streamline the eventual transfer, as well as control the investment strategy of those funds. Furthermore, you can hold your assets in Australian dollars, which removes any subsequent currency risk and allows you to hold all your retirement funds in the same currency.
3. You can transfer your accrued pension to an eligible Australian arrangement
Assuming your UK pension is eligible to be transferred, and you’re old enough for the transfer to take place, you can transfer your UK pension funds to an Australian fund, known as a QROPS (Qualifying Recognised Overseas Pension Scheme).
A QROPS is a scheme that HMRC has officially recognised as being eligible to receive transfers from registered pension schemes in the UK.
Without a QROPS registration, a UK scheme is not permitted to make an overseas transfer, so you will need to check carefully that the scheme you intend to transfer to is authorised correctly.
You should be aware that you don’t have to be a permanent resident in order to transfer your pension to an Australian QROPS, but you do need to be before you can start to access your funds.
Find out more: Why a QROPS could form an essential part of your retirement plan
4. If you can transfer, there may be significant tax advantages for doing so
As well as ensuring that all your retirement funds are in the same country in which you plan to retire, transferring your UK pension to Australia can offer significant benefits as you’ll be creating a highly advantageous tax position for yourself.
This is because of the different ways retirement funds are taxed in the UK and Australia.
In the UK, there are tax incentives on your contributions, so that you can claim tax relief on your personal contributions up to your Annual Allowance (currently £60,000 gross) at your marginal rate of tax. You will, however, be liable for Income Tax on everything you draw from your fund, with the exception of 25% of your fund that you can take tax-free.
In Australia, the situation is reversed. So, while super contributions are subject to a discretionary rate of tax, withdrawals from the fund can be tax-free after age 60.
This means that by transferring your UK pension to a super fund, you can create a “win-win” scenario of enjoying tax relief as you accrue your fund, and then tax-free income from your pension.
You will, however, be subject to tax on the growth in your fund between the date of your arrival in Australia and when the transfer to a super fund takes place.
Find out more: Why you could really benefit if you transfer your pension from the UK to Australia
5. You may need to phase transfer your UK pension to a QROPS
One often overlooked part of the process when it comes to transferring your pension is that you may need to do this in stages, rather than as a single transfer.
This is because both personal contributions and transfers into any Australia super fund are limited by the Non-Concessional Contribution (NCC) cap, which is currently AUD $120,000 in each financial year.
However, you may be able to make use of the “bring forward” arrangement, which allows you to use the next two years’ worth of your NCC cap. This will allow you to currently contribute up to AUD $360,000.
Your remaining funds will continue to be invested in your UK arrangement until the final transfer has been completed.
6. Transferring your pension may not be the right course of action
Even if you can 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.
The most important issue to consider in this regard is your ultimate retirement plan. If you’re currently unsure as to where you will spend your retirement years, or believe you may be returning to the UK to retire, then transferring your pension funds may not be the best course of action.
You also need to consider the cost of transferring your fund. This could be expensive in relation to the total amount you are transferring.
Expert advice is essential
Regardless of your circumstances, we would strongly recommend that you get expert advice and guidance if you are thinking of transferring your UK pension to Australia.
For one thing, even if you are eligible to transfer, the process can be complex, and mistakes could prove costly and potentially irreversible.
You can also find out more about transferring your UK pension in our guide on this subject.
Get in touch
If you have any queries regarding transferring your pension, please get in touch with us.
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.