UK private pension transfer to Australia

[Anna Mat]

Hi all.

I was wondering if anyone has an experience with transferring UK private pension to Australia?

Any tips or recommendations appreciated. Thank you.

[Andrew from Vista Financial]

Hi Anna

Someone has literally just posted a similar question to you.

My reply to you will be the same:

The first question to ask is are you age 55 or over?

The reason I ask is that it is not possible to transfer a UK Pension to an OZ Super otherwise.

Cheers Andy

Edited April 11, 2023 by Andrew from Vista Financial

[Steve Elliott]

18 hours ago, Anna Mat said:

Hi all.

I was wondering if anyone has an experience with transferring UK private pension to Australia?

Any tips or recommendations appreciated. Thank you.

As Andrew says above, if you are 55 or older, then it is an option, otherwise it's not an option for you.

Once you have decided the pros and cons, then you need to determine whether you transfer it to the one and only HMRC approved QROPS managed super fund or whether you go down the Self Managed Super Fund pathway. You need to have a discussion with an expert who can provide you with objective and unbiased advice in this regard. I am currently in the process of moving my UK private pension at the moment. There are many benefits in bringing your private pension to Australia but there are a number of very strict rules which you have to comply with. These are rules imposed by the ATO in Australia as well as HMRC in the UK. An SMSF is not for everyone and you must obtain professional a advice as the consequences for falling foul of the rules can be severe. 

[Anna Mat]

Thank you Andy and Steve for your prompt reply. Just to double check we are talking about private pension not goverment pension. 

 

[Marisawright]

14 minutes ago, Anna Mat said:

Thank you Andy and Steve for your prompt reply. Just to double check we are talking about private pension not goverment pension. 

Yes, we are.   

One thing to remember is that once you have transferred it into Australian super, there is no way to transfer it back into a UK private pension.  So it's best to wait until you are 100% cast-iron sure that you are going to live in Australia for the rest of your days.

The other thing to consider is that, as Steve says, you have only two options to transfer your super:  one is into a fund run by a investment company (so you have to decide whether you trust that company to do a good job for you), and the other is to start your own SMSF (self-managed super fund), which is not really financially viable unless you have a very large pot of money.

If you don't transfer your UK pension, it doesn't disappear. You'll still be able to draw from it when you reach retirement age and it will have increased in value in the meantime, just as if you'd stayed in the UK.

Edited April 12, 2023 by Marisawright

[InnerVoice]

25 minutes ago, Marisawright said:

If you don't transfer your UK pension, it doesn't disappear. You'll still be able to draw from it when you reach retirement age and it will have increased in value in the meantime, just as if you'd stayed in the UK.

And whilst the income stream from your UK pension is taxable in Australia, your Aussie super isn't, so you could combine them in retirement to produce an income where you pay very little or no tax by drawing $18,200/annum (or whatever the tax-free earnings threshold is at the time) from your UK pension, until it's exhausted. That's assuming you don't intend to keep on working in retirement of course. This is in no way intended to constitute financial advice, but from a layman's perspective it seems like a pretty good idea.

 

[Parley]

3 hours ago, Marisawright said:

 

The other thing to consider is that, as Steve says, you have only two options to transfer your super:  one is into a fund run by a investment company (so you have to decide whether you trust that company to do a good job for you), and the other is to start your own SMSF (self-managed super fund), which is not really financially viable unless you have a very large pot of money.

 

It is best to be specific as no one knows what that means.

It is generally advised to have $200000 or more to make an SMSF viable. Probably because there are fees in managing it and so a good income is needed to make these fees worthwhile.

However i would not call $200K a very large pot of money.

[InnerVoice]

1 hour ago, Parley said:

It is best to be specific as no one knows what that means.

It is generally advised to have $200000 or more to make an SMSF viable. Probably because there are fees in managing it and so a good income is needed to make these fees worthwhile.

However i would not call $200K a very large pot of money.

It was a decade ago when I sort advice regarding this but the financial advisor I spoke to mentioned a figure of £200,000 to make it viable, which was significantly more than I had at the time, but as @Steve Elliott mentioned in the other thread on this subject the decision shouldn't just be about the fees.

[Marisawright]

4 hours ago, Parley said:

It is best to be specific as no one knows what that means.

It is generally advised to have $200000 or more to make an SMSF viable. Probably because there are fees in managing it and so a good income is needed to make these fees worthwhile.

However i would not call $200K a very large pot of money.

That figure was quoted at one time but I believe the minimum recommendation is a lot higher than that now 

[Andrew from Vista Financial]

20 hours ago, InnerVoice said:

And whilst the income stream from your UK pension is taxable in Australia, your Aussie super isn't, so you could combine them in retirement to produce an income where you pay very little or no tax by drawing $18,200/annum (or whatever the tax-free earnings threshold is at the time) from your UK pension, until it's exhausted. That's assuming you don't intend to keep on working in retirement of course. This is in no way intended to constitute financial advice, but from a layman's perspective it seems like a pretty good idea.

 

Well, yes that may be a way to look at it but as with all these things it will be down to individual circumstances.

There may be other income streams that come into play such as investment properties but also there's likely to be Age Pension benefits payable from either UK State Pension or Australian Age Pension perhaps both and these payments are assessable for tax essentially meaning that the 0% tax band is taken up.

Also other things to consider are how the UK Pension company will allow benefits to be paid (assuming we are not talking about a defined benefit/safeguarded benefit scheme), we are finding that more and more private pension companies are not offering drawdown for members living in Australia which means that only a Uncrystallised Funds Pension Lump Sum is allowable: https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/taking-your-pension-as-a-number-of-lump-sums

In a lot of cases these companies will only allow a single UFPLS payment and not a series of payments, the kicker is that these types of payments are taxable in the UK (first 25% tax free) and do not fall under the UK-AUS DTA.

 

 

[Andrew from Vista Financial]

17 hours ago, InnerVoice said:

It was a decade ago when I sort advice regarding this but the financial advisor I spoke to mentioned a figure of £200,000 to make it viable, which was significantly more than I had at the time, but as @Steve Elliott mentioned in the other thread on this subject the decision shouldn't just be about the fees.

In relation to making it viable from an advice fee perspective, if the Pension is a defined benefit pension we will only work on cases that have a value of around £200,000 and this is due to the need for two sets of regulated Advisers UK and Australia and because of all of the additional rules and regs put in place over the last few years making this type of work very very time consuming therefore the fees need to cover this and therefore with pots below this figure it's likely to outweigh the benefit.

In terms of a minimum balance for an SMSF when it comes to a Q/ROPS then around $250,000 is the figure that would probably make it comparative to the Q/ROPS retail scheme's fees.

If considering a SMSF outside of this then it comes down to what the person is looking to use it for, it may be a higher or lower figure and balance is just one factor to consider. ASIC have recently reversed their guidance on this as they used to say around $500,000 and no do not suggest a minimum figure: https://smsmagazine.com.au/news/2022/12/08/asic-guidance-drops-balance-figures/

Regards

Andy

Edited April 12, 2023 by Andrew from Vista Financial

[InnerVoice]

25 minutes ago, Andrew from Vista Financial said:

Also other things to consider are how the UK Pension company will allow benefits to be paid (assuming we are not talking about a defined benefit/safeguarded benefit scheme), we are finding that more and more private pension companies are not offering drawdown for members living in Australia which means that only a Uncrystallised Funds Pension Lump Sum is allowable: https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/taking-your-pension-as-a-number-of-lump-sums

In a lot of cases these companies will only allow a single UFPLS payment and not a series of payments, the kicker is that these types of payments are taxable in the UK (first 25% tax free) and do not fall under the UK-AUS DTA.

Hi Andy, thank you for your perspective. I will certainly check whether my Pension company offers drawdown option for members living in Australia.