Australia is a popular retirement destination for British expats due its warm climate and quality of life. Cities such as Sydney, Melbourne and Brisbane offer an excellent standard of living, and therefore it is no surprise that many Brits choose to move there every year.
If you are considering retiring to Australia from the UK and transferring your pension from a British pension scheme to an Australian superannuation scheme, you need to be aware that the rules and regulations in relation to overseas transfers are complex and constantly changing.
To transfer an English or British pension to an Australian superannuation fund without incurring penalties, you need to ensure that you are transferring the funds to a Qualifying Recognised Overseas Pension Scheme (QROPS) in Australia. While this was once a relatively simple process, changes to the UK pensions law regime in April 2015 saw many Australian superannuation funds closed down to new UK transfers.
While the number of QROPS in Australia has increased recently (click here for the full list), retirees need to be aware of new Australian regulations regarding overseas pension transfers that have been in place since 1 July 2017.
New British pension to Australia rules from 1 July 2017
For those wishing to transfer a British pension plan to an Australian superannuation plan, the new rules state:
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- British pensioners aged 55 and above are generally eligible to transfer to an Australian self managed superannuation fund, or a specialised complying public offer super fund, providing these funds are listed on the Australian QROPS list.
- To be eligible to transfer, individuals should be 55 years of age and above but not older than 65, unless employed in Australia.
- Private pension schemes, Self-Invested Personal Pensions (SIPPs), and final salary are eligible to be transferred. Only funded public sector pension funds can be transferred.
- Annuities purchased in the UK as well as UK state pensions cannot be transferred.
- The UK pension must not have begun paying a pension payment or annuity yet.
- A yearly cap of $100,000 per annum can be transferred for members 65 or over but under 75.
- A bring forward rule applies to members under age 65 for the amount of $300,000 over a three-year period.
- The maximum lifetime contribution is $1.6 million Australian dollars.
- You will need to be a tax resident in Australia at the time of the transfer and remain so for five to six years after the transfer, otherwise overseas transfer charges will apply.
- Individuals must comply with prescribed reporting and compliance HMRC requirements. This obligation continues until 10 years has lapsed from the date of the transfer from the UK.
As you can see, the rules and regulations relating to overseas pension transfers to Australia are complex. Furthermore, there’s tax implications to consider, as Australian superannuation plans are taxed differently to British pensions, and there are also tax issues that may affect you if you have dual citizenship.
In summary, moving a British pension to Australia is a complex and time consuming process. Therefore, seeking advice from an independent financial advisor (IFA) that has extensive knowledge of UK pension rules, Australian superannuation plans, QROPS requirements and tax implications is a sensible decision. This will ensure that you avoid paying penalties and fines, and that you understand the tax implications of transferring a UK pension to Australia.
At Credence International, we are well-placed to provide detailed, specific financial advice that is relevant to your personal situation. Our consultation process ensures that we gain a thorough understanding of your requirements and objectives for the future before we provide any advice.
If you are considering moving your British pension to an Australian superannuation plan, speak to us today and allow us to help you make your transfer with confidence.