If you have lived and worked in the UK for a period of time, you will have built up savings in a UK Pension. Due to the purpose of the UK pension (ie. to provide an income to people in retirement), there are numerous rules and restrictions when it comes to transferring your UK pension to Australia or another country.
If you have returned or moved to Australia and would like to transfer your UK pension to Australia, then you will first need to answer the question Can I transfer my UK pension to Australia?
Can I transfer my UK Pension to Australia?
In order to be able to transfer your UK pension to Australia, and to avoid paying significant amounts of taxes or penalties, you will need to satisfy the following criteria.
- Aged between 55 and 75 years
- Able to meet the “work test”
- Have a UK pension balance under $540k
If you are aged under 55 years you will not be able to transfer your pension to Australia, however there may be other options that you can discuss with your financial advisor to give you more control over your investments until you satisfy the requirements for transferring your pension.
What restrictions are there in transferring my UK pension to Australia?
- To avoid paying any relevant penalties, your UK pension should be transferred into a Qualifying Recognised Overseas Pension Scheme (QROPS). A QROPS is an overseas pension scheme that meets certain requirements set by HM Revenue and Customs (HMRC), and so you can only transfer your UK pension into an Australian superannuation fund that qualifies as a QROPS.
What taxes are involved in transferring my UK pension to Australia?
- If you are not an Australian resident when transferring your UK pension to Australia, then the transfer may be subject to an Overseas Transfer Charge of 25%
- The Australian government may tax transfers from a UK pension depending on when the pension is transferred and whether a tax election is made. If the transfer is made within 6 months of Australian residency, then there may be no Australian tax applicable. Alternative tax outcomes could be payment of 15% tax within the superannuation fund, or the transfer (or part thereof) could be assessed as part of the individuals personal taxable income, and taxed at their marginal personal income tax rate.
What are the benefits of transferring my UK pension to Australia?
The primary driver for most people in transferring their UK pension to Australia is to consolidate their finances in one country and reduce their administrative burden. However, there are other reasons why you might want to transfer your UK pension to Australia
- If the transfer is made within six months of returning to Australia, then the transfer should be tax-free
- Flexible draw-down during retirement
- Benefits are paid-out tax free from age 60
- Your UK pension benefits will not incur UK income tax charges on your death
- Flexibility to choose your investment options and currency holdings
- Your Australian Financial Planner can recommend your investment choice
If you are interested in understanding more about transferring your UK pension to Australia then you can arrange a complimentary discussion by completing the inquiry form below.