As well as considering what investment, income and tax free cash that an Australian Superannuation provides, when making the decision to complete a UK pension transfer to Australia, a UK pension member would also have one eye on the death benefits.
With that in mind, will a pension transfer to Australia (to an Australian QROPS) increase an individual’s death benefits or would a UK pension member be better off leaving funds in the UK (if the death benefit was the primary concern)?
The first point to ascertain is what are the death benefits available from a UK scheme?
The death benefits from a UK scheme depend on several factors, for example, the type of scheme. If an individual is a member of a UK employer sponsored scheme, the death benefits may be very different from that of a member of a UK personal pension. Typically, the death benefit for someone who is a current member of an employer’s scheme is a lump sum based on multiple of their salary (sometimes written under a separate cover) whereas a member of a UK personal pension would receive a return of fund.
If a UK pension member no longer works for the employer that the employer sponsored scheme relates to, the death benefits available may be paid in the form spouses/dependents pensions as opposed to a lump sum. If an individual leaves an employer and has a personal pension, then a return of fund would still apply on death.
Where an individual has already taken benefits from a scheme, the death benefits start to get a bit more restrictive. From an employer’s pension scheme, that is a final salary scheme, it is mainly widow’s and dependent’s pensions that are paid. From a personal pension in drawdown, a lump sum can be paid on death – less 35% tax. If an annuity is purchased, with UK pension funds, death benefits depend on the terms of the annuity at outset ie were dependents pensions or a guaranteed period included?
Australian superannuation schemes usually pay out lump sums on death (based on the value of balance of the fund at the time) regardless of whether a pension is payment or not.
If a UK migrant to Australia, is concerned about death benefits and looking at Australian QROPS (Qualifying Recognized Overseas Pension Schemes) as a scheme to transfer their UK pension funds to, then the individual should take pre-migration advice from a specialist adviser that understands BOTH the UK and the Australian systems. Global QROPS Ltd has the experience to provide this advice.
