UK state pension

[R. Scratcher]

Hi,

from reading posts regarding a subclass 864 aged parent visa applied for onshore I'm a little confused as to the UK state pension situation so perhaps someone could give me clarification.

I understand that one is given a bridging visa while your application is processed and I understand that you can be on the bridging visa for around six years. I have been told that Australian taxes on pension income don't have to be paid until such time as PR is granted. Is that correct so far?

I have read on this forum that the UK state pension is frozen immediately that you inform the UK authorities that you are no longer resident there. Does that mean that the UK government has the gall to tax your pension income for the six or so years whilst you are on a bridging visa yet deny you pension increased during those same years?

[Marisawright]

If you apply now, you could well be on the bridging visa for 8 years not 6. The queue is getting longer. 

Your UK pension will be frozen as soon as you cease to be legally resident in the UK. However you will not be legally resident in Australia either.  This has implications for tax and property purchase. 

[R. Scratcher]

Thank you for your prompt response Marisawright.

May I ask what those tax and property purchase implications are? I know that a non resident has to pay a premium and extra stamp duty to purchase property in Australia but are there other things?

[ramot]

28 minutes ago, R. Scratcher said:

Thank you for your prompt response Marisawright.

May I ask what those tax and property purchase implications are? I know that a non resident has to pay a premium and extra stamp duty to purchase property in Australia but are there other things?

This tax information was relevant to my situation.

We retired here in 2003 on the old 410 retirement visa. We were classed as temporary residents with the right to live in Australia. The Visa renewed every 10 years.

All our income which includes the state pension was taxed in UK as we have no Australian income. Our state pension was frozen from the day we moved here, but obviously has to be included as it is part of your income.

Cant help about purchasing property as the rules have changed and weren’t in effect when we purchased. I only know that as a temporary resident you pay a lot more stamp duty and as far as I know your purchase will have to be approved by the FIRB. 

 

[R. Scratcher]

Thanks for the information ramot.

I can absolutely understand that taxes have to be paid but it's hard to see the morality of taking taxes off you but denying you any increases. I bet they wouldn't exempt you from any increase in the rate of taxation though.

In that case I'd rather pay my taxes to the country in which I was living, even though I wasn't a permanent resident. Not that we get a choice in these things.

[ramot]

16 minutes ago, R. Scratcher said:

Thanks for the information ramot.

I can absolutely understand that taxes have to be paid but it's hard to see the morality of taking taxes off you but denying you any increases. I bet they wouldn't exempt you from any increase in the rate of taxation though.

In that case I'd rather pay my taxes to the country in which I was living, even though I wasn't a permanent resident. Not that we get a choice in these things.

We will be taxed more in Australia apparently now we have PR so perhaps be careful what you wish for. Will know for sure when everything is lodged.

[Marisawright]

2 hours ago, R. Scratcher said:

May I ask what those tax and property purchase implications are? I know that a non resident has to pay a premium and extra stamp duty to purchase property in Australia but are there other things?

Ramot has answered re the tax if you are retired.  If you are planning to work in Australia then I think it becomes more complicated and some professional advice might be useful.

For property purchases, you need to apply to FIRB for permission to purchase (for a substantial fee, of course).  Then you will pay around three times the normal stamp duty on the purchase.  For instance, in NSW an Australian would pay about $18,000 on a $500,000 property.   You will pay $57,000.

I assume you are currently resident in the UK?   If you are resident in the UK immediately before arrival, then you will be entitled to essential medical treatment under Medicare.   In practice, this seems to cover most forms of treatment.  If you are ordinarily resident elsewhere (e.g. France), then you need to check the agreement between Australia and that particular country. 

Be aware that by losing your residency in the UK, you will lose your right to treatment under the NHS, e.g. while on holiday (being a British citizen makes no difference).  Once you get your full visa and become a permanent resident of Australia, you'll be able to claim reciprocal cover as an Aussie, so it's just during the bridging visa that may be an issue.

I assume you're aware that if you wish to leave Australia, even for a short holiday, while on the bridging visa, you need to apply for permission (a BVB).     

[ramot]

10 minutes ago, Marisawright said:

Ramot has answered re the tax if you are retired.  If you are planning to work in Australia then I think it becomes more complicated and some professional advice might be useful.

For property purchases, you need to apply to FIRB for permission to purchase (for a substantial fee, of course).  Then you will pay around three times the normal stamp duty on the purchase.  For instance, in NSW an Australian would pay about $18,000 on a $500,000 property.   You will pay $57,000.

I assume you are currently resident in the UK?   If you are resident in the UK immediately before arrival, then you will be entitled to essential medical treatment under Medicare.   In practice, this seems to cover most forms of treatment.  If you are ordinarily resident elsewhere (e.g. France), then you need to check the agreement between Australia and that particular country. 

Be aware that by losing your residency in the UK, you will lose your right to treatment under the NHS, e.g. while on holiday (being a British citizen makes no difference).  Once you get your full visa and become a permanent resident of Australia, you'll be able to claim reciprocal cover as an Aussie, so it's just during the bridging visa that may be an issue.

I assume you're aware that if you wish to leave Australia, even for a short holiday, while on the bridging visa, you need to apply for permission (a BVB).     

I have been lucky to get treatment in UK both from Dr and hospital while on our regular trips back, even though not really entitled to it as I didn’t have Medicare on the 410 visa. I think the attitude was it was too much bother to sort it out, was just put down as Australian even though I had been completely honest.

 We always have travel insurance anyway so would have been covered if I had been charged. daft for anyone to travel without it.

[R. Scratcher]

Thank you for taking the time to answer my post. 

I must say that I'm shocked that one's pension is frozen from the day you get a bridging visa but they'll continue to take taxes from you without giving any animal increases. It just doesn't seem right to me. Though I suppose it shouldn't surprise me from a state/government that thought nursing staff employed  by the NHS from abroad should have to pay to use the NHS themselves, though under pressure have dropped those plans, and have plans to charge hospital staff to park while at work.

I could understand if they froze your pension on your getting PR, though why UK pensioners living in some countries get pension increases but others not is beyond me, but to tax without benefits is unbelievable. My pension was paid for with fifty years of National Insurance contributions.

I suppose I'm a bit old to look for fairness from a government.

[Ausvisitor]

12 minutes ago, R. Scratcher said:

Thank you for taking the time to answer my post. 

I must say that I'm shocked that one's pension is frozen from the day you get a bridging visa but they'll continue to take taxes from you without giving any animal increases. It just doesn't seem right to me. Though I suppose it shouldn't surprise me from a state/government that thought nursing staff employed  by the NHS from abroad should have to pay to use the NHS themselves, though under pressure have dropped those plans, and have plans to charge hospital staff to park while at work.

I could understand if they froze your pension on your getting PR, though why UK pensioners living in some countries get pension increases but others not is beyond me, but to tax without benefits is unbelievable. My pension was paid for with fifty years of National Insurance contributions.

I suppose I'm a bit old to look for fairness from a government.

The freezing of pension payments on migration to Australia has nothing to do with the current Government (apart from the fact they could opt to abolish it) as it has been in place for many decades (through both COnservative/Labour and Coalition governments).

I doubt you would pay UK tax on your pension as you are not resident in the UK; you would most likely be taxed in AUS as a temporary resident; but you will need to get some clarification from a taxation expert here.

Equally if your only income is the UK state pension there will be no income tax to pay (in the UK at least) as you will be under the threshold for taxation

 

The link here is no longer updated but is broadly still correct http://www.britishpensions.org.au/pension-guidelines.htm - the problem you have discovered has been around for ages

[R. Scratcher]

Hi Ausvisitor thanks for your reply.

The ridiculous anomaly of UK pensions being frozen in some countries but not in others has been the case for over 70 years. A cross party group of MPs have been petitioning successive governments to correct the injustice, in fact the Labour party before the last election had said that they would, but I see little to no chance of the current government doing so.

I have been advised by a migration agent that Australian tax is not levied whilst on a bridging visa. I have a private pension as well as the state pension so my income is above the threshold. I accept that taxes have to be paid but my point is that to pay taxes, and potential tax increases, but to be denied any pension increases whilst paying those taxes doesn't seem right.

 

[Ausvisitor]

9 minutes ago, R. Scratcher said:

Hi Ausvisitor thanks for your reply.

The ridiculous anomaly of UK pensions being frozen in some countries but not in others has been the case for over 70 years. A cross party group of MPs have been petitioning successive governments to correct the injustice, in fact the Labour party before the last election had said that they would, but I see little to no chance of the current government doing so.

I have been advised by a migration agent that Australian tax is not levied whilst on a bridging visa. I have a private pension as well as the state pension so my income is above the threshold. I accept that taxes have to be paid but my point is that to pay taxes, and potential tax increases, but to be denied any pension increases whilst paying those taxes doesn't seem right.

 

I don't disagree at all - whilst I've got 25+ years before it becomes an issue for me. It will be one day, so I hope they sort it for you and your generation as then it will be fixed for mine to when I eventually get to retirement

[paulhand]

28 minutes ago, R. Scratcher said:

I have been advised by a migration agent that Australian tax is not levied whilst on a bridging visa

Migration Agents (unless they are also accountants/tax agents) are not qualified to give tax advice, so I won't either, but I would suggest that you seek proper advice on this. It is also worth looking at the ATO website which has a useful residence calculator.

6 hours ago, Marisawright said:

However you will not be legally resident in Australia either.

Holding a bridging visa does not mean you are not legally resident in Australia. You are not a permanent resident, but you are completely legal and you can be resident.

 

As a general observation - what the ATO and what Immigration consider "usually resident" is not necessarily the same thing

[Fisher1]

10 hours ago, R. Scratcher said:

Thank you for taking the time to answer my post. 

I must say that I'm shocked that one's pension is frozen from the day you get a bridging visa but they'll continue to take taxes from you without giving any animal increases. It just doesn't seem right to me. Though I suppose it shouldn't surprise me from a state/government that thought nursing staff employed  by the NHS from abroad should have to pay to use the NHS themselves, though under pressure have dropped those plans, and have plans to charge hospital staff to park while at work.

I could understand if they froze your pension on your getting PR, though why UK pensioners living in some countries get pension increases but others not is beyond me, but to tax without benefits is unbelievable. My pension was paid for with fifty years of National Insurance contributions.

I suppose I'm a bit old to look for fairness from a government.

The International Consortium of British Pensioners (google for more info) has been fighting to correct this injustice for years. They have been freezing pensions in some countries outside the UK for decades. The excuse given is that there is no reciprocal agreement with those countries - although no effort has been made to arrange such an agreement for about twenty years. In any  case our pensions Are a domestic matter - nobody gets a UK pension if they haven’t contributed, and the amount they get depends on how many contributions have been made, so it shouldn’t matter where you are living. The Uk is also the only country in Europe to apply such a mean condition to your choice of location. It soon begins to bite as well - I left in 2017 and reckon I am already £50 approx p.m. down.  Whatever you do, if you are selling a property on which capital gains would be due (I.e. buy to let) don’t sell it until you are officially resident in Australia.

 

[Marisawright]

13 hours ago, R. Scratcher said:

. My pension was paid for with fifty years of National Insurance contributions.

Actually, I don't think it was.  It's the story we were all told but I don't think it was true. Now the UK government is trying to pull back on paying pensions, the lie has come back to bite them - because people think they are entitled to "what they paid in".   

I've been trying to find a calculation that would tell me what proportion of NI contributions goes towards pensions.  Then I could work out what the total would be over a lifetime's work, and then calculate the final pension that could be derived from that (taking into account growth from investing it).  The Australian superannuation system has certainly been a revelation to me - it's scarey how much money you need to contribute over your career, to end up with a decent pension pot at the end. 

I paid an extra 6 years' NI contributions.  I'll get the whole lot back in my pension payments within 3 years, when I'll be 68.   I've found some articles which say  you get about £260 a year (for life) for every year you paid National Insurance.  

[R. Scratcher]

8 hours ago, Fisher1 said:

The International Consortium of British Pensioners (google for more info) has been fighting to correct this injustice for years. They have been freezing pensions in some countries outside the UK for decades. The excuse given is that there is no reciprocal agreement with those countries - although no effort has been made to arrange such an agreement for about twenty years. In any  case our pensions Are a domestic matter - nobody gets a UK pension if they haven’t contributed, and the amount they get depends on how many contributions have been made, so it shouldn’t matter where you are living. The Uk is also the only country in Europe to apply such a mean condition to your choice of location. It soon begins to bite as well - I left in 2017 and reckon I am already £50 approx p.m. down.  Whatever you do, if you are selling a property on which capital gains would be due (I.e. buy to let) don’t sell it until you are officially resident in Australia.

 

I have just Googled it and according to ftadvisor.com and many others, the UK state pension is the lowest in the developed world. According to the statistics quoted the UK state pension in 2017 equated to 29% of average earnings while the average European Union countries countries state pensions equated to 70.9% of average earnings. Shameful for a country that boasts of being the fifth wealthiest economy in the world.

If only working people's pensions were linked to politicians.

[R. Scratcher]

5 hours ago, Marisawright said:

Actually, I don't think it was.  It's the story we were all told but I don't think it was true. Now the UK government is trying to pull back on paying pensions, the lie has come back to bite them - because people think they are entitled to "what they paid in".   

I've been trying to find a calculation that would tell me what proportion of NI contributions goes towards pensions.  Then I could work out what the total would be over a lifetime's work, and then calculate the final pension that could be derived from that (taking into account growth from investing it).  The Australian superannuation system has certainly been a revelation to me - it's scarey how much money you need to contribute over your career, to end up with a decent pension pot at the end. 

I paid an extra 6 years' NI contributions.  I'll get the whole lot back in my pension payments within 3 years, when I'll be 68.   I've found some articles which say  you get about £260 a year (for life) for every year you paid National Insurance.  

Marisawright,

Be very careful or you'll become as cynical, bitter and twisted as me.

I think I did pay for my pension, medical care etc with my National Insurance contributions. Actually National Insurance contributions are a big con. They don't go into any sort of pot or fund t o pay for welfare, health or pensions,they just get mixed with general taxation. It's a bit like the road tax you pay on your car which used to be called the "road fund licence". Many years ago it was actually used to fund road building and repairs but governments long ago decided to just chuck it in with the rest of the money that they waste.

 

[Marisawright]

16 minutes ago, R. Scratcher said:

I think I did pay for my pension, medical care etc with my National Insurance contributions. 

 

And what do you base that assessment on?  I'm willing to bet that the contributions you made to NI for pensions falls far short of the funds needed to pay your pension, even if the government hadn't raided the funds for other purposes.  Certainly, based on what I've paid in, I'm getting far more than I expected.  

I think Australia has the more honest system.  There is no separate fund to pay for pensions, and pensions are a benefit (like unemployment benefit) not an entitlement.  Of course, people stlil think they're "entitled" to get a state pension and will go to great lengths to sequester away their wealth so they can get it.  

Edited July 16, 2020 by Marisawright

[Ausvisitor]

17 minutes ago, R. Scratcher said:

Marisawright,

Be very careful or you'll become as cynical, bitter and twisted as me.

I think I did pay for my pension, medical care etc with my National Insurance contributions. Actually National Insurance contributions are a big con. They don't go into any sort of pot or fund t o pay for welfare, health or pensions,they just get mixed with general taxation. It's a bit like the road tax you pay on your car which used to be called the "road fund licence". Many years ago it was actually used to fund road building and repairs but governments long ago decided to just chuck it in with the rest of the money that they waste.

 

You "might" have paid for your pension with contributions if the following is true (using figures based on today's value of money and the current new state pension of £175 p/w)

If for 35 years you earnt £70,000 a year you would have paid £184,100 in NI contributions

If for 20 years you receive your pension (full amount) you will get approx £184,000 in payments

So if you earned under £70K for any of those years or live over 21 years you haven't paid in enough to cover what you actually take out.

To compound this though NI isn't just for Pensions it also covers the costs of

• The NHS
• Unemployment benefit
• Sickness and disability allowances
• The state pension

So if you've ever had expensive (or just lots of) medical treatment the amount you get back increases further (i.e. if you have £50K worth of surgery, you hit your "paid in" level at 14 years of pension payments)

 

Of course this ignores Employer NI contributions on your behalf - but they really aren't "yours" they are a levy on employment to pay for sickness and unemployment services

[R. Scratcher]

18 minutes ago, Marisawright said:

And what do you base that assessment on?  I'm willing to bet that the contributions you made to NI for pensions falls far short of the funds needed to pay your pension, even if the government hadn't raided the funds for other purposes.  Certainly, based on what I've paid in, I'm getting far more than I expected.  

I think Australia has the more honest system.  There is no separate fund to pay for pensions, and pensions are a benefit (like unemployment benefit) not an entitlement.  Of course, people stlil think they're "entitled" to get a state pension and will go to great lengths to sequester away their wealth so they can get it.  

I base my statement on basis that, in my opinion, I entered into a contract with the UK state. Actually we don't have a choice do we? That I pay that which is required of me and in return I/we receive the "benefits" in return. During my lifetime I've seen the benefits slowly whittled away while contributions only ever went up.

I have no idea whether what I paid in covered what I'm getting out, all I know is that I paid all that was asked of me.

[R. Scratcher]

20 minutes ago, Ausvisitor said:

You "might" have paid for your pension with contributions if the following is true (using figures based on today's value of money and the current new state pension of £175 p/w)

If for 35 years you earnt £70,000 a year you would have paid £184,100 in NI contributions

If for 20 years you receive your pension (full amount) you will get approx £184,000 in payments

So if you earned under £70K for any of those years or live over 21 years you haven't paid in enough to cover what you actually take out.

To compound this though NI isn't just for Pensions it also covers the costs of

• The NHS
• Unemployment benefit
• Sickness and disability allowances
• The state pension

So if you've ever had expensive (or just lots of) medical treatment the amount you get back increases further (i.e. if you have £50K worth of surgery, you hit your "paid in" level at 14 years of pension payments)

 

Of course this ignores Employer NI contributions on your behalf - but they really aren't "yours" they are a levy on employment to pay for sickness and unemployment services

As I've said in a previous post National Insurance contributions are just another aspect of general taxation. I really don't want to go further with this as my original point was about the justification, not that any government needs one, of taking taxes from someone but denying them pension increases.

For me paying taxes and National Insurance is like insuring your house, car or life. You take out insurance hoping to never make a claim, well I certainly do.

In my own case I left school aged fifteen. Left school on Friday and started work on the following Monday. Thank goodness I have never been unemployed, never been hospitalised and never had sickness benefit. No complaints from me as I believe in a welfare state and others have not had my good gortune. Incidentally I have claimed once in my life on my house insurance and once on car insurance but consider that my premiums were money well spent because some poor souls have had need to claim.

I will just reiterate my two points. In my opinion, and my opinion only, to tax someone yet deny them pension increases is unfair. To give pension increases to people that live abroad in some countries but not others is also unfair.

[ramot]

Moderators 

I suggest this becomes a separate thread

It will take up space in the parent visa thread, and isn’t really about parent visas. Just discontent  about the UK state pension and taxes.

Thank you.

Edited July 16, 2020 by ramot

[shiner]

On 15/07/2020 at 16:43, R. Scratcher said:

Hi,

from reading posts regarding a subclass 864 aged parent visa applied for onshore I'm a little confused as to the UK state pension situation so perhaps someone could give me clarification.

I understand that one is given a bridging visa while your application is processed and I understand that you can be on the bridging visa for around six years. I have been told that Australian taxes on pension income don't have to be paid until such time as PR is granted. Is that correct so far?

I have read on this forum that the UK state pension is frozen immediately that you inform the UK authorities that you are no longer resident there. Does that mean that the UK government has the gall to tax your pension income for the six or so years whilst you are on a bridging visa yet deny you pension increased during those same years?

Was this question ever answered?

I understand that one is given a bridging visa while your application is processed and I understand that you can be on the bridging visa for around six years. I have been told that Australian taxes on pension income don't have to be paid until such time as PR is granted. Is that correct so far?

[Marisawright]

21 minutes ago, shiner said:

Was this question ever answered?

I understand that one is given a bridging visa while your application is processed and I understand that you can be on the bridging visa for around six years. I have been told that Australian taxes on pension income don't have to be paid until such time as PR is granted. Is that correct so far?

Yes that’s right except that the waiting time is more like eight years

[shiner]

Just to confirm, does this mean that if I have a bridging visa, and file a tax return in another country,  I do not have a to file a tax return in Australia until I become a PR.

(No income in Australia)