Standard Life - all or nothing!!

[plodling2002]

Good day all.

Apologies if this has been mentioned before, I need some help/advice.

I live in Queensland, at present I have a private pension sum with Standard Life in the UK, its only £30,000,  I wanted to draw out my 'tax free' amount of £7,900, (I also have a British bank account), so I rang Standard Life from Queensland, the lady on the phone stated that because I no longer live in, or have a UK address, Standard Life will only let me cash in the whole amount, (no idea why!), so I said "ok, lets do that then" where I was then informed that if I do, I will be given an emergency tax code and will probably lose around 40%, I was fuming, (at the tax people, not her), however, she stated that there are companies in the UK that will allow me to do the tax free withdrawal and leave the rest there, unfortunately she was not allowed to recommend any company or give me a name. Does anyone know of another company I can transfer that money to so I can then withdraw the tax free amount, or any other way around it?, I did try and contact my UK Financial Advisor but didn't even receive a reply, mind you I haven't contacted them since the 90's. As a side note, I don't  even know whether or not I could claim any of that 40% tax back if I did just cash it all in, its seems so difficult trying to do anything from here - Yours, mildly angry Rick 

[Marisawright]

I'm not surprised you're fuming. Unfortunately it's the way the tax system works. It would be the same if you were in the UK, wanting to transfer an Aussie lump sum.

When you receive a lump sum of money, it' regarded as 'income'.  It just gets added to your total taxable income for that year.  So let's say you're earning $75,000 a year, and you get a lump sum of another $50,000.   Then your total income for that year is $125,000, and suddenly you're in the top tax bracket!  You've also got to consider that you've got the UK taxman to worry about as well as the Australian one, and I don't know how that affects it.

I can't see how you can possibly withdraw the whole amount and not pay tax on it.  It doesn't matter whether the money stays in the UK or comes to Australia, you've still received it from the pension fund, so it counts as income. There may be some loophole that allows you to get around that, but I can understand why the pension person didn't want to name names. 

If you only really wanted a small amount anyway, you might just as well leave the money in the fund and take the pension when you get to that point. 

[BendigoBoy]

Mebbe worth giving Hargreaves Lansdown a call.  I've got a couple of SIPPs with them from before moving out.  I've *no* idea if they'll allow you to do a 25% withdrawal of TFC if you're overseas or not.  But no harm in giving them a bell and asking.  Decent platform for investments, as well.

[Marisawright]

Just now, Marisawright said:

I'm not surprised you're fuming. Unfortunately it's the way the tax system works. It would be the same if you were in the UK, wanting to transfer an Aussie lump sum.

When you receive a lump sum of money, it' regarded as 'income'.  It just gets added to your total taxable income for that year.  So let's say you're earning $75,000 a year, and you get a lump sum of another $50,000.   Then your total income for that year is $125,000, and suddenly you're in the top tax bracket!  You've also got to consider that you've got the UK taxman to worry about as well as the Australian one, and I don't know how that affects it.

I can't see how you can possibly withdraw the whole amount and not pay tax on it.  It doesn't matter whether the money stays in the UK or comes to Australia, you've still received it from the pension fund, so it counts as income. There may be some loophole that allows you to get around that, but I can understand why the pension person didn't want to name names. 

If you only really wanted a small amount anyway, you might just as well leave the money in the fund and take the pension when you get to that point.   You will have to pay tax on it, but your income will be low by that time anyway.

 

[plodling2002]

I should say that I have no income whatsoever in the UK so don't know if that would effect me being able to claim back some of the 40% tax should I decide to go that way...

 

.....and thanks for the replies so far everyone....

[Marisawright]

1 hour ago, plodling2002 said:

I should say that I have no income whatsoever in the UK so don't know if that would effect me being able to claim back some of the 40% tax should I decide to go that way...

From what I can see, you'd probably be liable for 20% tax by the UK taxman, because you're a foreigner being paid an income in the UK.  40% only applies over 50,000.  So maybe you could claim some back.

But don 't forget about the Australian taxman.  You'll need to declare the lump sum on your tax return as income, and it will be taxed the same as a salary.  If the lump sum plus your other annual income up into the next tax bracket, that will cost you a lot more and could be 37%.  

[rammygirl]

You should only be taxed in Australia, but they will not recognise ant tax free element. You may need to check with an accountant exactly how to do this. 

[Marisawright]

20 minutes ago, rammygirl said:

You should only be taxed in Australia, but they will not recognise ant tax free element. You may need to check with an accountant exactly how to do this. 

When I looked it up, it appeared that he'd be classed as a foreigner receiving investor income in the UK, so he'd have to pay UK tax.  The 40% tax rate is for foreigners with an income over 50,000, the 20% tax rate is for below that figure. 

Edited April 7 by Marisawright

[plodling2002]

Thanks again all, I was thinking something along the lines of transferring it to someone like Legal and General, (don't know if they have the same rule as Standard Life), and withdrawing it bit by bit kind of thing. Maybe I'll have just suck it up as they say here.......

[Marisawright]

2 hours ago, plodling2002 said:

Thanks again all, I was thinking something along the lines of transferring it to someone like Legal and General, (don't know if they have the same rule as Standard Life), and withdrawing it bit by bit kind of thing. Maybe I'll have just suck it up as they say here.......

The first thing you'll have to check is whether, as a non-resident, you're even allowed to open a new account with another provider.  You certainly can't open a new bank account so it's not safe to assume. 

[Jehwal]

19 hours ago, plodling2002 said:

Good day all.

Apologies if this has been mentioned before, I need some help/advice.

I live in Queensland, at present I have a private pension sum with Standard Life in the UK, its only £30,000,  I wanted to draw out my 'tax free' amount of £7,900, (I also have a British bank account), so I rang Standard Life from Queensland, the lady on the phone stated that because I no longer live in, or have a UK address, Standard Life will only let me cash in the whole amount, (no idea why!), so I said "ok, lets do that then" where I was then informed that if I do, I will be given an emergency tax code and will probably lose around 40%, I was fuming, (at the tax people, not her), however, she stated that there are companies in the UK that will allow me to do the tax free withdrawal and leave the rest there, unfortunately she was not allowed to recommend any company or give me a name. Does anyone know of another company I can transfer that money to so I can then withdraw the tax free amount, or any other way around it?, I did try and contact my UK Financial Advisor but didn't even receive a reply, mind you I haven't contacted them since the 90's. As a side note, I don't  even know whether or not I could claim any of that 40% tax back if I did just cash it all in, its seems so difficult trying to do anything from here - Yours, mildly angry Rick 

Last year i cashed a pension with the coop. Yes UK taxed me emergency tax but at the end of UK financial year they sent a cheque for that tax back to me.

as i received a cheque i had to open. great Southern Bank account as Westpac no longer take overseas cheques. I now have to declare the amount as income in oz.

[plodling2002]

2 hours ago, Jehwal said:

Last year i cashed a pension with the coop. Yes UK taxed me emergency tax but at the end of UK financial year they sent a cheque for that tax back to me.

as i received a cheque i had to open. great Southern Bank account as Westpac no longer take overseas cheques. I now have to declare the amount as income in oz.

Thanks Jehwal....did you have to prompt the UK Tax people or did they just send it out of the blue?

[Jehwal]

5 hours ago, plodling2002 said:

Thanks Jehwal....did you have to prompt the UK Tax people or did they just send it out of the blue?

I actually applied and they refused but at the end of the year they send me the claim forms

[DT55]

On 07/04/2024 at 11:03, Marisawright said:

I'm not surprised you're fuming. Unfortunately it's the way the tax system works. It would be the same if you were in the UK, wanting to transfer an Aussie lump sum.

When you receive a lump sum of money, it' regarded as 'income'.  It just gets added to your total taxable income for that year.  So let's say you're earning $75,000 a year, and you get a lump sum of another $50,000.   Then your total income for that year is $125,000, and suddenly you're in the top tax bracket!  You've also got to consider that you've got the UK taxman to worry about as well as the Australian one, and I don't know how that affects it.

I can't see how you can possibly withdraw the whole amount and not pay tax on it.  It doesn't matter whether the money stays in the UK or comes to Australia, you've still received it from the pension fund, so it counts as income. There may be some loophole that allows you to get around that, but I can understand why the pension person didn't want to name names. 

If you only really wanted a small amount anyway, you might just as well leave the money in the fund and take the pension when you get to that point. 

I’m confused. I thought with pensions lump sums, and the regular payments were taxed differently ie with lump sums you are only taxed on any gains not the whole amount. Or is this different? Or have I misunderstood?

[Chortlepuss]

I transferred mine to My Expat SIPP. There’re not stellar performers, but at least you can withdraw part payment

[Alan Collett]

On 07/04/2024 at 17:04, rammygirl said:

You should only be taxed in Australia < snip >

Not with lump sum payments ...

Best regards.

[Alan Collett]

On 07/04/2024 at 15:56, Marisawright said:

From what I can see, you'd probably be liable for 20% tax by the UK taxman, because you're a foreigner being paid an income in the UK.  40% only applies over 50,000.  So maybe you could claim some back.

But don 't forget about the Australian taxman.  You'll need to declare the lump sum on your tax return as income, and it will be taxed the same as a salary.  If the lump sum plus your other annual income up into the next tax bracket, that will cost you a lot more and could be 37%.  

Unfortunately not correct.

Lump sum = taxable in the UK with the benefit of the personal allowance.   Tax repayment claim available for the excess tax deducted under PAYE following the application of the emergency PAYE Coding by the pension scheme administrators.

In Australia only the Applicable Fund Earnings are taxable (growth in the value of the fund since becoming a tax resident of Australia).   Foreign Income Tax Offset available for the UK tax paid.

Best regards.

[Alan Collett]

https://www.gov.uk/guidance/claim-a-tax-refund-when-youve-flexibly-accessed-all-of-your-pension-p53z

Tax repayment claim form for the excess tax deducted on the pension lump sum.

If you need help please feel able to contact me at the bdhtax.com email address below.

Best regards.

[rammygirl]

Oh. My lump sum ( local gov salary pension) was paid gross to me and taxed in ATO on growth. I did have to apply to have continued pension payments paid gross though. I then declare these in Aus

[Alan Collett]

2 minutes ago, rammygirl said:

Oh. My lump sum ( local gov salary pension) was paid gross to me and taxed in ATO on growth. I did have to apply to have continued pension payments paid gross though. I then declare these in Aus

That's right.

100% of a pension (= recurring payments) is taxed solely in Australia under Article 17 of the UK-Aus tax treaty.

To be distinguished from the taxation of lump sums from a UK pension fund.

Best regards.

[Philip]

I was researching this for my own knowledge and found the following information which may be useful - I have no experience with those services (not least because it will be 15 years before I can get my UK pensions)

https://gmtax.com.au/super-uk-pensions/uk-pensions/uk-pensions-lump-sum/

https://www.directdocs.com.au/ozstomember.html

[Ausvisitor]

3 hours ago, Philip said:

I was researching this for my own knowledge and found the following information which may be useful - I have no experience with those services (not least because it will be 15 years before I can get my UK pensions)

https://gmtax.com.au/super-uk-pensions/uk-pensions/uk-pensions-lump-sum/

https://www.directdocs.com.au/ozstomember.html

I'm going to have this problem one way or the other.

I'll either be in AUS with a super and a decent UK pension that will be taxable or in UK with a private pension and a sizable Super that will be taxable.

Either way I can't see a way to avoid tax on both ... I guess the flip side is you only get taxed if you are getting money so it's better than not being taxed I suppose 

[plodling2002]

Many thanks everybody

 

[Andrew from Vista Financial]

 

 

[Andrew from Vista Financial]

On 07/04/2024 at 10:00, plodling2002 said:

Good day all.

Apologies if this has been mentioned before, I need some help/advice.

I live in Queensland, at present I have a private pension sum with Standard Life in the UK, its only £30,000,  I wanted to draw out my 'tax free' amount of £7,900, (I also have a British bank account), so I rang Standard Life from Queensland, the lady on the phone stated that because I no longer live in, or have a UK address, Standard Life will only let me cash in the whole amount, (no idea why!), so I said "ok, lets do that then" where I was then informed that if I do, I will be given an emergency tax code and will probably lose around 40%, I was fuming, (at the tax people, not her), however, she stated that there are companies in the UK that will allow me to do the tax free withdrawal and leave the rest there, unfortunately she was not allowed to recommend any company or give me a name. Does anyone know of another company I can transfer that money to so I can then withdraw the tax free amount, or any other way around it?, I did try and contact my UK Financial Advisor but didn't even receive a reply, mind you I haven't contacted them since the 90's. As a side note, I don't  even know whether or not I could claim any of that 40% tax back if I did just cash it all in, its seems so difficult trying to do anything from here - Yours, mildly angry Rick 

This method of access is known as Uncrystallised funds pension lump sum (UFPLS).

 

HMRC Pension rules allow these to be either a single payment or a series of however the pension companies can decide on what they offer and we are finding quite a few pension companies now that are only offering the single UFPLS option to Australian residents.