The way to transfer a pension to Australia from the UK is to transfer into a QROPS. Find out more about QROPS here and whether it is the right step for you
You will need a QROPS
For anyone in the UK wanting to transfer a pension to Australia, there are key conditions that need to be met for the transfer to be permitted. Generally, the most attractive kind of Australian pension scheme is a SMSF (Self Managed Superannuation Fund) or “super”. If a SMSF meets the right conditions, it will be recognised by the UK’s HMRC as a QROPS (Qualifying Recognised Overseas Pension Scheme) SMSF. If an overseas pension scheme is not a QROPS, the transfer may be refused, or the transfer will be subject to a tax of at least 40%.
If you want to transfer your UK pension to Australia, a QROPS is your only option.
Aged 55 years and over
You can only transfer pension funds into a QROPS in Australia if you are aged 55 or over. This effectively means that if you are under 55 years old, you can’t transfer a UK pension to Australia.
Options for UK pension members under 55 years old
If you are under 55 years old, the experts at bdhSterling can ensure you are managing your UK pension funds wisely to maximise growth and introduce a UK SIPP (Self Invested Personal Pension) strategy which can help you optimise your pension balance in the years leading up to age 55, whilst allowing you to take currency and investment control.
How big is the pension pot?
The cost of setting up a QROPS transfer can be significant, so, before you transfer a pension to Australia, obtain advice to justify the cost of the transfer. Therefore, pension management is important in the years before you consider transferring to a QROPS.
Which Solution is best for you?
If you are going to transfer a pension to Australia, a QROPS is the only option. The UK government publishes a list of the recognised QROPS that are available around the world, including Australia. Take note that just because a scheme is recognised as a QROPS now, does not mean it will still be a recognised scheme in the future.
Who will manage your QROPS?
One of the interesting features of an Australian SMSF is that members are the trustees of their own funds. That means it is up to you to make decisions on how the fund is managed. There are differences in investment options within a QROPS compared to a UK pension – which is where the experts at bdhSterling can assist you in providing this advice.
GBP or AUD?
When you transfer a pension to Australia you get to choose what currency is used. There is a cap on non-concessional contributions of $100,000 AUD per annum or $300,000 AUD for those using the bring forward rule. The cap for concessional contributions is $25,000 AUD per annum. Contributions that exceed the cap are taxed using the marginal rate and in the case of concessional contributions, there is an excess concessional contributions charge (ECC) to pay as well.
While the value of the British pound is low compared to the Australian dollar, you will benefit from being able to bring more funds into the QROPS without reaching the cap.
Applicable Fund Earnings Tax
A feature known as “applicable fund earnings” means that when you do finally transfer your pension into an Australian QROPS, any growth in the level of your pension from the date you arrived in Australia, up to the date when you make the transfer, will be treated as a concessional contribution. Concessional contributions can be charged at the superannuation scheme rate of just 15% or at the individual member’s Australian marginal tax rate.
It is recommended that you engage a Financial Conduct Authority (FCA) licensed adviser to ensure the recommendation is your best interest.
Furthermore, these concessional contributions are not counted towards the concessional cap.
You may have to pay a transfer tax of 25%
Please be aware that if you live in Australia and wish to transfer your pension to another overseas QROPS fund there may be an overseas transfer charge (OTC) to pay. This is 25% of the transfer value.
There’s a lifetime contribution limit
Once your total super balance reaches the lifetime contribution limit of $1.6 million AUD, you cannot make any further non-concessional contributions.
Let bdhSterling help you transfer a pension to Australia
Transferring a pension to Australia takes a lot of planning and it is essential to seek expert advice on the matter. For more information about Australian supers and how to transfer a pension to Australia, speak to an expert at bdhSterling today.
Australian UK Pension Transfer Seminars
If you currently live in Australia and wish to learn more about transferring your pension, we invite you to attend one of our complimentary seminars being hosted in Perth, Sydney and Melbourne in the first two weeks of October.
To register, click on the link below: