Pensions...

[Geordielass44]

Just wondering about pensions....we are planning to move to Oz at the end of next year...my husband was made redundant a few years ago (private pension with the railways) so his pension is frozen and he isn't paying into an NHS one...I have a teacher's pension which, due to the changes to teacher's pension in the Uk , i will opt out of at the end of March next year. We are both entitled to lump sums as well as a yearly pension from 60.

 

We are still not 100% sure if we will stay in Australia past this age as we have an eye on Malta as a possible retirement destination.

 

i am just wondering if anyone knows what the tax implications would be if

 

a - we stayed in Australia and drew our UK pensions at that point (60)....(i am assuming we will also by this time have an Australian superannuation - can you get this at 60?)

 

b - we left the pensions in the UK, pay into the Australia superannuation scheme then eventually settle in Malta???

 

Pensions were not something i had even bothered thinking/worrying about until recently....mid/late 40's so it all seems scarily close!!

[MARYROSE02]

If you live in retirement in Australia, then any STATE pension from the UK will be 'frozen', i.e. no indexation for cost of living. If you are living in Malta, well, pensions from both the UK and Australia will be paid to you wherever you want them to be paid. I've opted to have my Royal Mail pension paid into my UK bank account, rather than paid into my Aussie account, and then I transfer it myself, or draw it out piecemeal using my UK debit card (Perhaps not a good idea in retrospect, now that I've seen the FX charges.)

 

If you are living in Malta, drawing income from both Australia and the UK, well, there are possible tax implications, and you could be submitting tax returns to all three countries, although there are taxation agreements so you avoid paying tax twice, or thrice, so find an accountant or tax agent.

 

If you work in Australia, you will be in a super scheme here.

[Marisawright]

As MaryRose says, you can claim your NHS pension in Australia but it doesn't get indexed, so it stays the same forever. You need 35 years of NI contributions to get the full pension - if you have fewer years than that, you get pro rata.

 

As for your own UK pensions, I'm not familiar with how they work. However as far as Australian tax is concerned, you'd simply declare them as income on your Australian tax return (assuming you're living in Australia). You can transfer them to an Australian pension but if you think Australia won't be your forever home, I think that would be a silly thing to do - there are always fees associated with such a transfer, so why incur them if it's not necessary?

 

Australian pensions - if you're already in your 40's, you won't have much in your Australian super fund by retirement, so your best bet will probably be to withdraw the whole lot when you reach 60, which you can do. If you're not planning to stay in Australia, choose a standard superannuation fund - don't start your own Self Managed Super Fund or you'll have all kinds of tax headaches wrapping it up at the end. You can choose your own super fund, you don't have to use the one suggested by your employer - personally I always recommend the industry funds, because they're not-for-profit.

 

You will be eligible for the full Australian government pension IF you stay in Australia - though it is means-tested, so if you have good pensions and other assets, you may not get it immediately. If you leave Australia, that changes - if you reside overseas, you need 35 years' residency to get the full pension, and if you have less than that, you get pro rata. The other catch with the Aussie pension is that if you go back to the UK before you're eligible, you won't get a cent, because the UK has no social security agreement with Australia. Luckily Malta does, so you'll be able to claim the Australian pension from there.

 

http://www.dss.gov.au/about-the-department/international/international-social-security-agreements/current-international-social-security-agreements/australia-and-malta-frequently-asked-questions

 

If you establish a home in Malta, you'll be treated as non-resident by both the British and Australian governments and that will change what tax you're liable for. Australia taxes non-residents more harshly than residents, so you won't want to keep investments (especially investment properties) in Australia after you go. Your Australian super fund won't be taxed unless it's a self-managed one.

 

When you become resident in Malta you'll be subject to their tax laws. Assuming you've liquidated all your assets/investments in Australia, you won't have to fill out an Aussie tax return (even if you're getting an Australian pension). You need to find out how your British private pensions are treated by the UK once you're a non-resident: you may or may not have to do a UK tax return depending on the outcome.

Edited July 13, 2014 by Marisawright

[Parley]

I'm not sure about drawing out all your super at age 60, whether that is the best thing to do.

 

If it is possible to leave the money in super and progressively draw it out that is usually better.

Reason being is Superannuation is concessionally taxed. If you draw the lot out and put it in some other vehicle you will pay full tax on earnings whereas earnings in a super fund are only taxed at 15%.

 

Most people for this reason draw out a certain amount each year. This is regulated, you have to take out so much each year, as you are required to spend that money in retirement.

 

Best to see an adviser when the time comes.

[Marisawright]

I'm not sure about drawing out all your super at age 60, whether that is the best thing to do.

 

If it is possible to leave the money in super and progressively draw it out that is usually better.

Reason being is Superannuation is concessionally taxed.

 

For anyone staying in Australia, or anyone who's built up a substantial balance in their super fund, I agree 100%. But the OP says they're already in their late forties, so they have only ten or fifteen years to go before they (probably) leave Australia again to go to Malta. So they're not going to have much of a super balance anyway. Also, if they leave their super in the fund and draw it gradually, that could be regarded as income in Malta, and they'll have to declare it and be taxed on it. Whereas if they draw the lump sum they may be able to find an appropriate tax-sheltered investment over there (I don't know if they can put more money into their UK pensions, for instance, or the equivalent of the UK tax-free savings account).

[Andrew from Vista Financial]

a - we stayed in Australia and drew our UK pensions at that point (60)....(i am assuming we will also by this time have an Australian superannuation - can you get this at 60?)

 

If you were to stay in Australia then the UK Pensions would be declared in Australia and assessed for tax accordingly, Australia Superannuation is currently tax free in most cases upon withdrawal or if rolled to an Account Based Pension (this is generally what most do) the income and earnings are tax free (again in most cases).

 

You may be able to access your superannuation at age 60, this is the earliest that someone can access it nowadays if born after 1 July 1964 however for full access a person would also need to be retired otherwise up to 10% annually could potentially be withdrawn, once you get to age 65 then full access regardless of whether you are retired or not is permitted.

 

b - we left the pensions in the UK, pay into the Australia superannuation scheme then eventually settle in Malta???

 

UK Pensions would be subject to the tax agreement in place between UK and Malta at that time.

 

Australian Super monies may be better placed being withdrawn prior to moving to Malta depending on how Malta will treat foreign pension income and whether they may have domestic tax efficient investments where the monies will be better placed.

 

Any Private Pensions although classed as frozen will generally indexed to the cost of living (CPI most commonly used nowadays) pre and post retirement.

 

UK State Pension will be indexed until such time as you receive the payments, in Australia once in payment then no indexation will apply.

 

KR

 

Andy

[MARYROSE02]

As MaryRose says, you can claim your NHS pension in Australia but it doesn't get indexed, so it stays the same forever. You need 35 years of NI contributions to get the full pension - if you have fewer years than that, you get pro rata.

 

As for your own UK pensions, I'm not familiar with how they work. However as far as Australian tax is concerned, you'd simply declare them as income on your Australian tax return (assuming you're living in Australia). You can transfer them to an Australian pension but if you think Australia won't be your forever home, I think that would be a silly thing to do - there are always fees associated with such a transfer, so why incur them if it's not necessary?

 

Australian pensions - if you're already in your 40's, you won't have much in your Australian super fund by retirement, so your best bet will probably be to withdraw the whole lot when you reach 60, which you can do. If you're not planning to stay in Australia, choose a standard superannuation fund - don't start your own Self Managed Super Fund or you'll have all kinds of tax headaches wrapping it up at the end. You can choose your own super fund, you don't have to use the one suggested by your employer - personally I always recommend the industry funds, because they're not-for-profit.

 

You will be eligible for the full Australian government pension IF you stay in Australia - though it is means-tested, so if you have good pensions and other assets, you may not get it immediately. If you leave Australia, that changes - if you reside overseas, you need 35 years' residency to get the full pension, and if you have less than that, you get pro rata. The other catch with the Aussie pension is that if you go back to the UK before you're eligible, you won't get a cent, because the UK has no social security agreement with Australia. Luckily Malta does, so you'll be able to claim the Australian pension from there.

 

http://www.dss.gov.au/about-the-department/international/international-social-security-agreements/current-international-social-security-agreements/australia-and-malta-frequently-asked-questions

 

If you establish a home in Malta, you'll be treated as non-resident by both the British and Australian governments and that will change what tax you're liable for. Australia taxes non-residents more harshly than residents, so you won't want to keep investments (especially investment properties) in Australia after you go. Your Australian super fund won't be taxed unless it's a self-managed one.

 

When you become resident in Malta you'll be subject to their tax laws. Assuming you've liquidated all your assets/investments in Australia, you won't have to fill out an Aussie tax return (even if you're getting an Australian pension). You need to find out how your British private pensions are treated by the UK once you're a non-resident: you may or may not have to do a UK tax return depending on the outcome.

 

I"m not sure if this applies to an NHS pension, because that is an employer one and also probably 'final salary.' As an employer pension, you usually opt out of Serps, or whatever it's called. I did when I joined the Royal Mail pension, and I know that is indexed. It's the actual state pension, which you pay for through your NI contributions, which is 'frozen' when you come to Australia (and other Commonwealth countries?)

[Marisawright]

I"m not sure if this applies to an NHS pension, because that is an employer one and also probably 'final salary.' As an employer pension, you usually opt out of Serps, or whatever it's called. I did when I joined the Royal Mail pension, and I know that is indexed. It's the actual state pension, which you pay for through your NI contributions, which is 'frozen' when you come to Australia (and other Commonwealth countries?)

 

Sorry I was referring to the state pension - I assumed that's what the OP meant when she referred to the "NHS pension" as neither she nor her husband has ever worked for the NHS.

[MARYROSE02]

Sorry I was referring to the state pension - I assumed that's what the OP meant when she referred to the "NHS pension" as neither she nor her husband has ever worked for the NHS.

 

Oh, possibly they were talking about the state pension, assuming it's paid by NHS, rather than, whichever department is responsbile? DHSS? It's all very confusing, where pensions are concerned.

[Geordielass44]

Hi thanks for the reply - my husband does work for the NHS but has opted out of the pension.

 

Pensions = headache! :-)

[Geordielass44]

Thanks everyone for your replies - thanks Andy sorry if posted in the wrong section.

 

I will have 20 years paid into the State pension (i can access this at age 67 - at the moment but they do keep moving the goal posts!!) and 17 years in the teachers pension which i can get fully at 60(The teacher's one will be frozen but continue to increase as it is index linked. I understand that the state pension is frozen and doesnt increase if we stay in Oz but will increase in Malta...

 

My husband works for the NHS (carer soon qualified nurse) but has opted out of the pension. He has a frozen railways pension - index linked so increasing in value) as he worked for them for 25 years and he can access this at 60. He will have paid 27 years towards his state pension(can access this at 68 years of age now)but again this will be frozen if we stay in oz.

 

We are hoping to have 10 years plus paid into Australian superannuation scheme so not a huge amount but still something...

 

We are going to have bits of pension everywhere!

 

I think we will be leaving our UK Pensions here and assess the situation nearer pension age though i think i would like some sort of forecast of what we would have at 60/65 from all the pots! I have a breakdown of our UK pensions (both state and private) but its difficult to gauge what we will manage to put into the Australian superannuation by then... Its scary worrying that we won't have enough to live off and i dont want to be paying tax all over the place!

 

i think getting advice regarding Maltese tax/pension agreements with Uk/Oz may be helpful. Lets hope the UK doesn't leave the EU and muddy the waters in the next 15 years or so!!

 

Tracy :-)

[Marisawright]

Thanks everyone for your replies - thanks Andy sorry if posted in the wrong section.

 

I will have 20 years paid into the State pension (i can access this at age 67 - at the moment but they do keep moving the goal posts!!) and 17 years in the teachers pension which i can get fully at 60(The teacher's one will be frozen but continue to increase as it is index linked. I understand that the state pension is frozen and doesnt increase if we stay in Oz but will increase in Malta...

 

My husband works for the NHS (carer soon qualified nurse) but has opted out of the pension. He has a frozen railways pension - index linked so increasing in value) as he worked for them for 25 years and he can access this at 60. He will have paid 27 years towards his state pension(can access this at 68 years of age now)but again this will be frozen if we stay in oz.

 

We are hoping to have 10 years plus paid into Australian superannuation scheme so not a huge amount but still something

 

We are going to have bits of pension everywhere!

 

The thing with Australian superannuation is that you don't have to convert it into a pension, and since you're not likely to have much in it, it probably won't be worth converting it to a pension anyway. You will be able to withdraw the whole amount as a lump sum on retirement, and that will likely be your best option. It will also simplify matters for you! Then if you also liquidate any investments in Australia, you'll be able to score Australian tax implications off your list entirely.

[KirkyG]

Pensions are a headache and I am currently in a quandary as to what to do with mine. I have a standard L&G personal pension and achieved PR in May, is the best thing to do to transfer it across now?

[Andrew from Vista Financial]

Hi KirkyG

 

There is no definitive answer on this one as it will be down to personal circumstances and goals and objectives.

 

With the UK experiencing a major overhaul of the pension system specifically to defined contribution (DC) schemes (market linked pensions) there really is little difference in the way that these pensions work both pre and post retirement.

 

Some areas of difference:

 

 

• UK DC pensions mostly enjoy a tax-free environment on earnings;
  

 

 

 

• Oz Super is generally taxed between 10 - 15% on earnings in accumulation;
  

 

 

 

• Death tax now potentially only if you die after age 75 in UK;
  

 

 

 

• Death tax in Oz generally 0% if paid to spouse/dependants at any time;
  

 

 

 

• Monies are generally tax free on withdrawal irrelevant if income or lump sum in Oz in retirement;
  

 

 

 

• Payments are assessed for tax in Oz if left in UK and drawn as lump sum or income;
  

 

 

 

• Access in UK generally from age 55 likely to move to age 57;
  

 

 

 

• Access in Oz currently from age 55 however progressively moving to age 60 (for anyone born after 1 July 1964 60);
  

 

 

 

• Access up to 100% in retirement in OZ;
  

 

 

 

• Access 25% in UK however from next April also up to 100%.
  

 

 

 

Since there is not much difference now between the two systems you may wish to think about things like how you would like to administer and control the pension pots as well as the exchange rates now and going forward.

 

Personally just comparing the 2 systems side by side I believe Australia still have the edge over the UK with a big potential benefit being access is tax-free after age 60 (although depending upon the amount of income or lump sum withdrawal involved and a persons’ other assets/forms of income this may not be applicable).

 

One final thing to note is to investigate with the UK provider as to whether any Guaranteed Annuity Rates (GARs) or deferred exit charges apply, this in itself could be a decision maker.

 

 

 

KR

 

Andy

[Cass1e04]

My wife 53 has a couple of UK NHS final salary pensions they have transfer values, but can only see mention that the transfer value re lates to transferring into other NHS pensions.

we are due to move to OZ shortly and will be permanently residing up to and past retirement age

Can and do these need transferring into QROPS or should they just sit frozen and drawn in oz at the appropriate age?