Exchange rate high means now could be a great time to transfer your UK pension to Australia

Category: Australia & News & United Kingdom

On 21 August 2023, the exchange rate for UK sterling to Australian dollars reached AUD $1.99.

This was the highest rate since April 2020, and – as you can see from the chart – the rate has steadily increased over the past 12 months from a five-year low point of $1.67 in September 2022:


This can clearly be advantageous if you’re looking to transfer money from the UK to Australia, particularly when it comes to your accrued pension fund. 

So, now could be the perfect time to explore the benefits associated with moving your UK pension across to an Australian arrangement. 

There are some key advantages of transferring

If you are living in Australia with firm plans to spend your retirement years there, it can make sound financial sense to transfer any accrued UK pensions to an Australian super fund.  

Likewise, if you have plans in place to make the move to the other side of the world, it can help to understand what the advantages of transferring your pension can be.

Clearly your ability to transfer your pension is subject to eligibility, and we would strongly recommend that you take expert financial advice before starting on the process. 

Please note, you won’t be able to transfer your UK pension fund to an Australian superannuation fund without incurring substantial tax liability unless the receiving fund is a Qualifying Recognised Overseas Pension Scheme (QROPS) under the UK rules. 

Our guide – Transferring your UK pension to Australia – gives you more information about eligibility, what a QROPS is, and the process involved. 

Taking that into account, read about five key advantages of transferring your UK pension to an Australian super.

1. You will benefit from a highly advantageous tax position

In Australia, once you reach age 60 and have retired, generally all income and lump sums you draw from your super funds will be free from tax. 

Conversely, income and lump sums taken from UK pension schemes can be taxed at your marginal rate of Income Tax, except for your 25% tax-free entitlement.

Unlike in Australia, the key tax advantages for your UK pension occur when you’re making contributions to your fund, as tax relief at your marginal rate makes them a highly tax-efficient way to save for your retirement.

This difference means you can create a highly advantageous tax position for yourself with tax relief on your contributions and no tax on withdrawals. As a result, transferring your UK pension to a super can provide you with significant tax savings during your retirement years. 

2. Your retirement fund will be in the country where you will retire

By transferring your pension to an appropriate Australian Super Fund, you can conveniently manage and access your funds locally, where you plan to spend your retirement.  

Although it is possible to manage most financial transactions online, you are likely to find it beneficial to have your retirement fund in the same country you’re living in.

3. It’s an opportunity to consolidate your pensions into a single arrangement

You could well have a series of UK pension funds that you have accumulated during your working life in the UK. For example, you may have been a member of different employer-sponsored schemes, as well as having your own private arrangement. 

You may also have super arrangements from previous Australian employer schemes, or through discretionary contributions you’ve made yourself. 

By transferring to a new super fund, you will be able to transfer all your UK pensions to it, subject to eligibility. It will also be a good opportunity to consolidate any different super funds you may have into a single plan.

One plan is far easier to control and manage than a series of them. This is especially the case when it comes to key issues such as your investment strategy, and when you start withdrawing income in retirement.

If this is something you’re interested in pursuing, it’s crucial that you seek professional advice before acting on any decision. Indeed, some providers won’t allow pension transfers unless it’s handled by a professional adviser.

4. You will be able to stop worrying about long-term currency risk

If you are thinking of transferring your accrued UK pension funds to an Australian super, a highly favourable exchange rate could be the prompt you need to take the next step in the transfer process.

By doing so, you will be able to remove any future concerns about varying exchange rates throughout your retirement.

As you saw in the graph, exchange rates have fluctuated more than 16% in the last 12 months. If you have a pension fund of £500,000, that could equate to lost value of £80,000.

By transferring your pension, and by using a currency exchange specialist to find the best possible rate, you remove uncertainty around the future value of your retirement fund. 

5. Succession planning

Although UK pensions are generally not included in the value of your estate for Inheritance Tax (IHT) purposes, there are occasions, such as if the money is in your bank account rather than pension fund, when IHT could be an issue. 

With Australia not having any IHT, the superannuation system doesn’t have the same restrictions, meaning your beneficiaries may be better off when you pass away. 

Get in touch

If you’d like to learn more about transferring your pension and making the most of these advantages, we’re here to guide you through the process.

Get in touch to find out how we can help you.

Please note

The value of your investments 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.