If you are migrating to Australia and are a member of a UK final salary (defined benefit) scheme, clients need to decide whether they wish to transfer these UK benefits to an Australian QROPS (Qualifying Recognized Overseas Pension Scheme).
Australian Superannuation schemes (approved as QROPS) do not operate in the same manor as UK final salary schemes therefore what considerations need to be taken into account?
Final Salary schemes in the UK work on the principle that a member receives a pension (and tax free cash) based on their years of service and their final earnings. This a key difference to Australian QROPS where and individual member’s retirement benefits are based on the size of the fund accrued.
With this in mind, how is the UK final salary scheme transfer value calculated?
The current rules set out for calculating pension transfer values, after 30th September 2008, for UK Final Salary schemes, is that the basic ‘cash equivalent value’ should be at least the best estimate of the money required to be invested in the scheme to reproduce the relevant member’s benefits.
All UK final salary schemes will employ a scheme actuary to calculate the transfer value and the actuary will take into account several factors relating to the individual’s benefits as well as the employer funding levels of the scheme.
Global QROPS Ltd will complete an analysis for all clients looking to transfer out of a UK final salary scheme to ascertain whether the transfer value, a scheme actuary has calculated, makes a pension transfer to Australia a viable option.
