I Want to Transfer a Pension to Australia - What Are My Options?
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. If you are not old enough for a QROPS, the experts at bdhSterling can ensure you are managing your UK pension funds wisely to maximise their growth.
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, make sure you have a large enough fund. This is why pension management is so important in the years before you consider a transfer to a QROPS.
You may have to pay a transfer tax of 25%
When you transfer a UK pension to Australia there may be an overseas transfer charge (OTC) to pay. This is 25% of the transfer value - a significant amount that may be the difference between the transfer being viable or not. There are some exemptions from paying this charge for an Australian resident however, so you should always seek the advice of an expert.
Which QROPS SMSF is best for you?
If you are going to transfer a pension to Australia, a QROPS SMSF scheme is an 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. Reputable QROPS’ experts such as bdhSterling, will be able to give you the best advice should the status of your Australian pension scheme be about to change.
Who will manage your QROPS?
One of the interesting features of an Australian QROPS 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. Remember there are differences in investment options within a QROPS SMSF compared to a UK pension – therefore it is important to take expert 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.
Already living in Australia but too young for a QROPS?
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. Advice would be needed to ensure that the most favourable rate is used upon transfer.
Furthermore, these concessional contributions are not counted towards the concessional cap.
Don’t draw any funds from your UK pension
If you have already purchased an annuity from a UK pension you will no longer be able to transfer that pension into a QROPS. Likewise, if you have a final salary scheme you must not have drawn any money from it.
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.