Andrew from Vista Financial

So as the NHS Pension is a Defined Benefit Scheme the Pension Income is tested against the Income Test and the Assets Test does not apply. https://www.servicesaustralia.gov.au/income-streams?context=22526

Hi Neil Some comments which may assist. We have had no issues rolling QROPS to Non-QROPS Accounts for clients ever (no Non-QROPS Scheme have refused to accept the rollover), of course we have done this after the clients are clear of any unauthorised payment charge timeframe (5/10). We use Industry/Not Profit Funds regularly, although I cannot think off the top of my head whether we have recently done this with AustralianSuper however I am unsure why they have said that to you (do you have that in writing from them or was that information provided by a call centre rep?), it's simply superannuation monies being received and they are not being asked to undertake any HMRC reporting. In relation to transferring a UK Pension that has been crystallised, this is doable, typically the hurdles can be that once crystallised a subsequent transfer must be en bloc (in full) AND it must be transferred to a scheme that has no other money (although seems not to be an issue with the size of pot you describe). Would be advisable to check with the UK Scheme that they are happy to still allow a transfer to a QROPS if PCLS is taken (we have not experienced any issues to date). Other exit options are simply accessing the monies (regardless of the 5/10 year timeframe) when the relevant Australian retirement conditions of release are met via Transition to Retirement Pensions (albeit max 10% of balance each FY) or Account Based Pensions as these types of payments are not unauthorised. Regards Andy

I am not totally certain but think it may be to do with the UK money laundering changes which may also be connected to (some) Banks starting to give notice to Australian Residents about closing their Bank Accounts (I know Barclays are doing this currently).

I am currently dealing with a Pension Transfer to a QROPS Super for a client with an AJ Bell SIPP, he told me that they gave him notice to move it now that he is Australian Resident as they will not be able to support it for him (he recently put it into Drawdown). I know from experience of late that many UK Pension companies are not offering drawdown to Australian Residents also and only offering the ability to access it as a single lump sum (these have generally not been SIPP providers though).

Personally, I am not aware of any SIPP Trustees that are non-UK resident nor am I aware of any Aus Resident SIPP Trustees. In my opinion/experience a registered UK Pension/SIPP will be classified by the ATO as a foreign super fund (there may be in certain limited circumstances a situation where they are not, but I have not come across one in my 15 years practising).

From a Superannuation legislation perspective then withdrawals from superannuation (including in pension phase) for a member who is 60+ (perm or citizen) are Australian tax free with the exception of untaxed super funds (typically government schemes). In the example above the member is age 58 and for members under age 60 there are tax assessments to consider when accessing Super/Pension (Income Streams) hence the mention of the DTA.

Hi Yes as mentioned by Marisa the UK State Pension is considered under the income test, however you are entitled to a certain amount of income per fortnight without a reduciton to the Age Pension: https://www.servicesaustralia.gov.au/income-test-for-age-pension?context=22526 It's perhaps not as bad as you might think, this is a very easy to use basic Age Pension entitlement calculator which you could try, to get a bit of an idea: https://www.noelwhittaker.com.au/resources/calculators/age-pension-calculator/ With regards to using your Super to clear the mortgage, this may be a good idea but of course there would be various factors to consider based on individual circumstances and goals and objectives such as retirement income requirements, mortgage interest rate, intention for you home through retirement, balance of super and investment risk profile of you/your wife, age of Age Pension applicants spouse (ie you), other income streams, other assets etc. It may be that your Wife's Super balance (along with other assessable assets) is under the lower asset threshold https://www.servicesaustralia.gov.au/assets-test-for-age-pension?context=22526 or just slightly over to the point that the income test is still the barrier. It may be depending on your age that a Superannuation spouse sharing strategy may be appropriate. Could be well worth while taking some financial advice on this one. Regards Andy

Well from a HMRC perspective, lump sums are not covered under the DTA ie UFPLS meaning UK have taxing rights whereas pension income is covered under the DTA (for Perm/Ctizens) meaning Australia have taxing rights. With the ATO, typically, foreign super (UK pensions) lump sums are assessed for tax on the Applicable Fund Earnings (AFE): https://www.ato.gov.au/individuals/super/foreign-super-funds/withdraw-a-lump-sum-directly-from-a-foreign-super-fund/ Whereas pension income is assessed for tax as income. Whilst that seems straight forward there may be times where the ATO might view an income payment (under HMRC's eyes) as a lump sum payment and a lump sum payment (under HMRC's eyes) as an income payment. This comes down to the periodicity of the payment, here's some light reading for you: https://www.directdocs.com.au/ozstomember.html Regards Andy

Thank you Steve, nice of you to say. Yes, typically the fee to set up ranges between $595 and $1,040 and exit fees are now not charged.

Indeed there may be a situation where someone decides that Australia is no longer the place for them and decide that they will move back to the UK. We would certainly not consider transferring a Pension to Australia unless there is intention to remain/retire here permanently, that's not just a consideration for SMSFs. But of course people's minds can change and so these risks do need to be considered, of all our SMSF clients this has happened once. If a person with a SMSF did choose to move back permanently to the UK then there are several ways that this may be dealt with without it creating too much of an issue, that may be a rollover to another Super Fund (QROPS or Non-QROPS) or a withdrawal of funds in their entirety. It does of course depend on the Trustees/Members circumstances such as age (preservation age) and how long they have been outside of the UK (non UK tax resident) and employment situation, these factors would dictate which angle of attack might be best when considering UK and Australian tax and super rules. So yes definitely something to think about if a SMSF is a serious contender.

Hi So yes AESF are the only public offer scheme that are able to accept UK pension transfers and as you say other than this it would have to be a SMSF. I deal regularly with AESF and have experience using them for clients for 7 years, I also have clients that we set up a SMSF (QROPS) for as well. The vehicle we recommend does depend on quite a number of things and this comes down to our clients’ goals and objectives, circumstances and preferences. Your balance does fit with a SMSF potentially being more cost effective however this may not be the case depending on what services and advice you need going forward. The 0.8% you mention is an administration fee and has nothing to do with fund management fees (thus performance), this fee is an explicit fee. Once in the Super Fund and on Platform the money can be invested into a range of managed funds and ETFs (ASX (AUD) and LSE (GBP) listed). There are index funds and active funds to choose from and these range from single sector to multi-asset (diversified) and so this is where the performance comes into play. I'd say and certainly from my client experience that he Vanguard diversified funds hold the most members money, for using these as an example the management expense ratio (fee (MER)) is 0.29%. Investment Management Fee's are implicit fee, performance is stated net of these fees. If you compare the fee (admin) for AESF to other Super Funds it is much higher, I'd say an average admin fee is 0.15%. That said, they have the monopoly, so this allows them to charge this, but they do also offer UK listed ETFs, which is pretty unique for a Super Fund and they of course do the HMRC reporting. if you compare this to an SMSF, well that depends on how much you want to do yourself or outsource. Most will outsource the admin and tax/financials, and they may use their Accountant to do these (therefore cost = how long is a piece of string) or outsource to a specialist SMSF Administrator. The fees for these do range and I'd say this might be between $1,500 - $3,500 annually, there is then regulatory and audit costs. The SMSF Administrator that we use cover the financials and engage the Auditor, so as an example with regulatory costs added (and based on no more than say 5-8 investment holdings) all up comes in around $2,500 annually. Once in the SMSF again like AESF the money can be invested, therefore depending on how you invest and what you want to invest in there going to be further fees. You then are not limited to the investments on the AESF Platform and can go further afield (for example it's even possible to invest in some industry funds now via an SMSF). SMSF investors may use an online broker and purchase direct shares/ETF's and so there is generally no administration fees to hold shares this way however some will set up an Investment Wrap or Platform to buy shares and managed funds as these provide a much better service in relation to managing the portfolio (not much of an issue when using an online broker account if only looking to hold say 1 or 2 diversified ETFs) however there is then administration fees attached. That covers the main differences between the two in terms of fees and investments, you do then have to understand the other differences ie responsibility etc and reporting (the SMSF Administration firm we use provide this service). Hopefully that assists a little. To go one step further, have you figured out you transfer strategy? I assume that you are age 59. When looking at a transfer strategy, i would need to understand what the Applicable Fund Earnings (AFE) are ie how much, as this will help understand if a transfer will need to be progressive or not. Also there may be some merit in looking at a strategy where a partial amount if transferred allowing a lump sum to be taken tax free with the residual; being transferred at a later date. This will assist in keeping admin fees down (if going down the AESF path for example). The other point to note is that the monies once transferred do not have to remain in the QROPS for that long (5-10 years is the max) but it may be possible to extract much sooner than this, this may work well if someone has a partner and has their contribution cap availability to utilise. Regards Andy

Yes you did say that, sorry, typo on my part. Yes correct, if transferring a pot with a lower AFE amount it is possible for an inidividual to elect to pay the tax at their marginal rate and this may make sense for some. In my experience it is quite rare and that's likely to be the size of the pots we deal with being much higher (generally higher AFE) and typically MTR's higher than 15%.

Hi This is actually not unusual nowadays, we are seeing this a fair bit with UK Pension providers in that if a member is an Australian Resident then the only option for them to take retirement benefits with that provider is to take the payment as a single payment under what is termed an uncrystallised funds pension lump sum (UFPLS) https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/what-is-an-uncrystallised-funds-pension-lump-sum-ufpls As this is classified as a lump sum payment from a HMRC perspective then it does not fall under the UK/AUS DTA meaing that the UK have taxing rights, the way the UK tax these payments is that there is a 25% tax free element and the remaining 75% is taxed at marginal tax rates although in the first instance tax is withheld at what they call emergency rates. However any overpayment of tax can be reclaimed including the 0% personal allowance. There will also be an assessment made by the ATO on the lump sum based on the growth of the pot typically since the member arrived in Australia however the tax that has been paid to HMRC will be acknowledged, this may mean that there will be a lower tax bill in Australia and even to the point of there being no tax bill. It is possible under UK rules and if the pension provider allows it (some still do) to instead of taking benefits under the UFPLS method take the benefits as flexi access Drawdown, with this method (if allowed by the provider) it is possible to take a Pension Commencement Lump Sum (PCLS) of up to 25% (UK tax free (not Australian tax free)) of the pot and the remainder can be drawn as and when required, typically a member will at the point of requiring an income make arrangements to have it paid monthly at a set amount, however the pot of money is still invested and so the pot may or may not exhaust depending on investment earnings along the way and amounts drawn. This is a similar arrangement to Australian Superannuation Account Based Pensions. The money taken once in Drawdown is classified by HMRC as Pension Income and does fall under the UK/AUS DTA which means that Australia has taxing rights (assuming the member is an Australian permanent resident/citizen), so it is really irrelevant whether or not it is under or over the UK personal allowance. However if the payments are periodic and it is elected to receive say $1,516 per month, then if the member has no other Australian income these payments will be in the OZ tax free threshold. That said typically there will be other taxable income in the mix if not immediately then at some future point ie UK State Pension and or Australian Age Pension so these State Pension are likely to take up the 0% allowance. Once again though, it seems to be that more and more providers are not allowing the Drawdown method for Australian Residents (we actually came across a SIPP provider just the other day not allowing it). Under UK rules it is possible to transfer pension prior to Drawdown, however many UK pension providers will not allow Australian Residents to open a Pension with them, there are a few SIPP providers around that do allow it however a lot of these providers require the business to be done under Financial Advisers only. Some private pensions may contain safe guarded benefits, this is where there is some form of guarantee attached (typically a promise of a higher Annuity Rate), with these Pensions if they are over the value of 30k GBP then (UK FCA) financial advice is required before a transfer can go ahead (and the advice may be for it not to go ahead). Most people now similarly to here in Australia do not purchase Annuities with their Pension pots and instead access them via Flexi-Access Drawdown or UFPLS payments (be that a single lump sum or a series of payments) but usually if the UK pot is reasonable high the amounts taken will be gradual to manage tax liabilities. This is of course where an Australian (QROPS) Super Fund should be considered as withdrawals are tax free over the age of 60, however of course investigation into the full individual circumstances will need to be considered to assess whether this is a better option or not. Andy

Hi Ken Where you say, "to minimise the amounts you can get tax free" do you mean if a person transferring wanted to declare AFE at their MTR (if they had no other income for example)?

Monthly Market Update June 2023 How the different asset classes have fared: (As at 30 June 2023) Asset Class 10 Yr % p.a. 5 Yr % p.a. 3 Yr % p.a. 1 Yr % p.a. YTD % 6 Mth % 3 Mth % 1 Mth % Cash1 1.69 1.17 1.01 2.89 1.70 1.70 0.90 0.30 Australian Bonds2 2.43 0.51 -3.51 1.24 1.51 1.51 -2.95 -1.95 International Bonds3 2.54 0.18 -3.64 -1.16 2.07 2.07 -0.30 -0.16 Australian Shares4 8.80 7.35 11.42 14.75 4.65 4.65 1.01 1.94 Int. Shares Unhedged5 13.28 11.57 13.56 22.75 17.59 17.59 7.70 3.16 Int. Shares Hedged6 10.64 8.42 11.54 16.68 14.71 14.71 7.08 5.56 Emerging Markets Unhedged7 5.82 2.44 2.83 4.36 6.59 6.59 1.25 0.85 Listed Infrastructure Unhedged8 10.12 7.02 7.92 1.97 2.57 2.57 0.03 -0.30 Australian Listed Property9 7.95 3.88 8.52 7.49 3.49 3.49 3.15 -0.09 Int. Listed Property Unhedged10 6.79 2.82 6.45 -0.07 3.93 3.93 1.24 0.23 Gold Bullion Unhedged11 4.69 8.77 2.44 4.96 5.03 5.03 -3.80 -2.83 Oil Unhedged12 -9.58 -4.88 29.46 -25.27 -9.83 -9.83 -4.83 4.29 1 Bloomberg AusBond Bank 0+Y TR AUD, 2 Bloomberg AusBond Composite 0+Y TR AUD, 3 Bloomberg Barclays Global Aggregate TR Hdg AUD, 4 S&P/ASX All Ordinaries TR, 5 Vanguard International Shares Index, 6 Vanguard Intl Shares Index Hdg AUD TR, 7 Vanguard Emerging Markets Shares Index, 8 FTSE Developed Core Infrastructure 50/50 NR AUD, 9 S&P/ASX 300 AREIT TR, 10 FTSE EPRA/NAREIT Global REITs NR AUD, 11 LMBA Gold Price AM USD, 12 Bloomberg Sub WTI Crude Oil TR USD Source: Centrepoint Research Team, Morningstar Direct International Equities In the month of June, international shares gained 3.16% in unhedged and 5.56% in hedged returns. This was a continuation of an already positive year for equities generally. This is despite the constant broadcasting of probably the most anticipated recession in history, although this may be more a sign of the digital age that we live in. The positive returns were generated from a broader increase across the sectors, which has not generally been the case in 2023. As mentioned last month, the mega-cap technology companies have been the primary driver of excess returns so far this year. A diversified basket of consumer discretionary, industrials and materials lead the global markets higher as markets shrugged off the infinitely distant seeming recession. The more defensive sectors of communications, utilities and healthcare lagged the market. Australian Equities Australian shares rose on the month but by a slightly smaller 1.94%. The Australian market has continued to lag its international peers during through 2023. Whilst both materials and financials were positive on the month, Australian healthcare fell a staggering 7.7%, pulling the market down considerably. It was also important to note that consumer discretionary did not perform like international peers, a potential sign of a weakening consumer backdrop in the light of drastically increasing mortgage repayments. Domestic and International Fixed Income In June, Australian bonds again fell for a second straight month with a -1.95% decline. The market started to price in a ‘higher for longer’ narrative that was not only isolated to Australian markets. The fight against inflation remains top priority for the RBA, even as there has been signs of cooling in recent months. ‘Peak rates’ do appear to be approaching, however. International bonds fell a muted -0.16% during the month as the markets ultimately suggested that inflation is too high, growth is still too strong, therefore there is a need for more rate hikes. Strong U.S. services data combined with a strong private payrolls number was partially to blame for this move higher in longer-term interest rates globally. Australian Dollar In June, the Australian Dollar (AUD) gained relative to other global currencies. Versus the United States Dollar (USD), the AUD was up 1.5% on the month. The increases in interest rates meant more capital moved into AUD to take advantage of the higher rates, moving the currency higher. Commodities – Gold and Oil Gold prices continued to move lower with a -2.83% fall on the month. The general move higher in interest rates forced gold prices to come down as investors moved money into interest bearing assets and out of the safe haven of gold. Contrary to last month, oil rallied 4.29% in June. This was somewhat of a relief rally for energy as oil has been sluggish through 2023. Global growth expectations continue to get revised downwards and therefore a lesser expectation for oil demand. Announced supply cuts from OPEC+ have somewhat stabilised the markets, however, relative to the post-Covid highs, it has been a long and sharp fall. Disclaimer The information provided in this communication has been issued by Centrepoint Alliance Ltd and Ventura Investment Management Limited (AFSL 253045). The information provided is general advice only and has not taken into account your financial circumstances, needs or objectives. This publication should be viewed as an additional resource, not as your sole source of information. Where you are considering the acquisition, or possible acquisition, of a particular financial product, you should obtain a Product Disclosure for the relevant product before you make any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. It is imperative that you seek advice from a registered professional financial adviser before making any investment decisions. 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