What you need to know about pensions for non-residents in Australia and the UK

Posted by Paul Davies on 25/09/20 14:38

If you are moving between different countries to work, making arrangements to contribute to your retirement fund is a key part of the financial planning process. It’s important to ensure you’re building up a fund to meet your needs in retirement.

As a non-resident in a new country, it’s therefore vital that you know the key details of what you can and can’t do, from a pension point of view. So, in this article, you’ll find useful help if you’re a non-resident Brit in Australia, or an Aussie who is non-resident in the UK.

Please be aware that this article only provides a very high-level overview of the current arrangements. You should seek specialist financial advice regarding pension planning, particularly regarding taxation and the portability of your arrangements.

Australian superannuation for non-residents

Regardless of your status, if you’re employed in Australia, pension contributions to the Australian superannuation scheme (‘super’) are compulsory. Your employer will automatically make a 9.5% deduction from your salary each month and will direct this into a plan for you. You also have the ability to pay your own personal contributions.

This means that even if you’re only in Australia working for a couple of years – maybe on a fixed-term contract – you’ll build up a sizeable pension fund, especially if you do make your own payments into the fund.

You should be aware that contributions are based on Australian earnings only. So, if you’re still earning in the UK, you should make sure you’re still making pension contributions to a UK pension based on those earnings.

If you’re self-employed you’ll need to make your own pension arrangements, making contributions into your own personal super fund. You should be able to claim a full deduction through taxation for contributions you make, or alternatively, you could be eligible for government co-payments if your earnings are low.

Australians moving to the UK can still contribute to their super even if they’re working overseas. This is particularly relevant if you’re planning to return to Australia to retire and take benefits.

You’ll need to make sure the super fund you’re in will accept non-resident contributions. If it won’t, consider moving your maintained super into a new fund that can accept such contributions before you leave.

UK pensions for non-UK residents

As long as the pension scheme rules allow, anyone can become or remain a member of a UK approved pension scheme, regardless of nationality and UK tax treatment.

To be able to get tax relief on your contributions you just need to be a 'relevant UK individual' – which effectively means someone who has UK taxable earnings. Tax relief is paid at your marginal rate of tax.

Basic-rate tax relief of 20% is paid at source, so for every £80 you contribute to your pension, the government will pay another £20. You can claim higher-rate tax relief through your tax return or self-assessment.

If you’re employed, your employer is obliged to set up a workplace pension scheme and pay 3% of your salary into the scheme. In addition, you’ll pay a minimum of 5% yourself (4% net).

Obviously, you can pay more if you wish – either into the same workplace arrangement or your own personal pension.

If you’re self-employed, you can set up your own personal pension, and get tax relief on your contributions.

With very limited exceptions, you can’t transfer your super to a UK pension scheme, but you can take the benefits from your super once you retire in the UK.

When you’re 55, you’ll be able to transfer the value of your UK pension to your Australian super – and this adds a level of flexibility to your retirement income planning.

You can still pay into a UK pension if you’re a Brit living and working in Australia as a non-resident, but tax relief will be limited unless you still have earnings in the UK.

The importance of advice

As we’ve already stated, it’s important to get financial advice when it comes to your retirement planning.

However, as each country’s taxation and superannuation rules are different, it is important that you work with an adviser with knowledge of both countries. This ensures you receive comprehensive and precise advice.

BDH are uniquely placed to support you, as we have offices in the UK and in Australia. We’re regulated by the Financial Conduct Authority (FCA) and Australian Securities and Investments Commission (ASIC), so we can offer expert advice on both your UK and Australian pensions.

Get in touch to find out how we can help.