UK Company Pensions

[Ghurkas]

I have three UK company pensions. One of these is 'final-salary'. Each of these three UK pensions is due to mature in the next year or so. When each of these three pensions mature I wish to withdraw the total amount from each. I do not wish to elect for an annuity. I need this money and ultimately I hope to bring the total proceeds to Australia as I need this money - painful though this might be presently, with the current exchange rate. I am wondering if UK Legislation will permit me to withdraw the total of each of these three company pensions when they mature so that I may bring the aggregated total amount to Australia.

[Notts]

Dealing with the final salary scheme first, you are unlikely to be able to take the full amount out on retirement (unless the amount is 'trivial'). It depends on the scheme rules, but you can normally take a lump sum free of UK tax, but the rest must be taken as an annual pension. This is because in return for the tax advantages of pension schemes, HMRC restrict the amount that can be removed without triggering a tax charge.

 

The other schemes (defined contribution) must be used to purchase an annuity before a certain age (75?) but you can draw an income before then. Again the taxman generally prohibits you from taking the whole lot out on retirement as you have had tax advantages saving through a pension scheme when you were working.

 

(This assumes you are not in a non-tax approved scheme, often only the case for senior execs with big pension pots).

 

How this interacts with Aus legislation if you chose to bring your pensions over, I don't know - but the reporting requirements mean that HMRC would find out about any big withdrawals.

[Andrew from Vista Financial]

Hi Ghurkas

 

Notts has pretty much covered off the UK end in that generally the maximum that you would be able to take as a lump sum from the UK at retirement is 25%.

 

If Pensions are transferred to Australia they would have to be transferred to a QROPS Fund and thereafter would be under obligation to both UK and Australian legislation/obligations.

 

Just briefly, UK legislation/obligation is a 10 year reporting period placed on the transferred Pension monies from arriving, this means that any subsequent withdrawal/transfer of monies is reported by the receiving Australalian scheme to HMRC.

 

An unauthorised payment (UP) could apply if the Pension monies are accessed whilst still within 5 full tax years of being a non-UK tax resident, a UP is essentially any withdrawal over and above what could have been made had the funds remained in the UK.

 

These charges if applied are extemely hefty.

 

Then to Australia, access is not allowable until a condition of release is met, a condition of release for full access is reaching age 65 or reaching preservation age (currently age 55) and retiring from the workforce.

 

Australia allows access to 100% of the fund for a person that has met a full condition of release.

 

I hope this helps, please note that I am not making any recommendations here and certainly I do not advise clients to transfer funds and then access 100% of them as this money is for their future retirement however I understand there may be reasons in certain cases and therefore I have given factual information around access to Pension/Superannuation.

 

 

Kind Regards

 

Andy

Edited April 5, 2013 by Andrew from Vista Financial

[Ghurkas]

Thanks for this Notts. It is rather what I thought but felt I had to have a go at drawing it all down.