Ever lived and worked in the UK but decided to settle in Australia? Well, you probably have some superannuation in the UK – what they call a pension fund. For a number of years, rules have allowed the transfer of these funds to Australia to make the management of your retirement funds an easier task however laws in the UK are changing which will mean that this option is no longer available. There is currently a proposal by the UK Government to ban the transfer of final salary pension benefits from public sector schemes. Legislation is currently being drafted for the change to take effect in April 2015. The change has come about as funded defined benefit schemes play an important role in funding long-term investment in the UK economy, which the Government does not want to put at risk by allowing the money to leave English shores.

What are some of the benefits of transferring to Australia? Investment Choice – you make the decision on where your funds are invested to make the most out of your money;

Death Benefits – (assuming the funds remain in superannuation or pension accounts) the full balance at the time of your death is payable to your beneficiaries or your estate (tax may apply) whereas funds are usually reduced or not able to be transferred to another on your passing if the money remains in the UK;

Tax benefits – the funds that are transferred, come in line with Australian superannuation tax rules, with returns taxed at 15% while in accumulation phase and then tax-free in pension phase. Benefits are paid out concessionally taxed prior to age 60 and tax-free from the age of 60.

Lump sum payments – you can take up to 100% of your superannuation out if a condition of release is met (UK tax may apply if within 5 years of being a tax resident). This is restricted to 15% in the UK otherwise additional penalty tax applies.

What are some of the drawbacks of transferring to Australia? Lifetime pension – some UK pension providers will pay a pension for your lifetime. In Australia, this type of pension is no longer available.

Exchange rate – the transfer of funds will also mean a conversion in money from pounds to Australian dollars which may mean a reduction in the value of your funds.

Growth not taxed – the growth in your UK pension is not taxed but if you transfer to Australia the growth from the date you became an Australian tax resident until the transfer is taxed at either 15% or your Marginal Tax Rate depending on your election.

QROPS – the provider receiving the transferred funds has to be a QROPS registered provider and report back to the UK any withdrawals or changes to your account for a period of 10 years after the transfer. In addition, if you consolidate with your other Australian super, any withdrawals from the fund will first be considered to be taken from the UK transferred funds.

What are the main things to consider when transferring a UK pension to Australia? Moving your pension funds from the UK has major implications that should be fully investigated and understood before a transfer is commenced to ensure that it is right for you because once it’s done, you can’t go back. Some of the main things to consider when looking at a pension transfer to Australia include:

*  you must have permanently left the UK with no intention of returning there.
contribution rules still apply and you cannot transfer in excess of the fund cap – currently $540,000. *please note that JBS may be able to help if your UK funds would breach this limit.
*  your UK pension must not have commenced paying a pension
be an Australian resident for tax purposes and have a TFN
if you transfer your funds within six (6) months of becoming an Australian tax resident, no tax is levied on the transfer to Australia.
*  if you transfer your funds outside six (6) months of becoming an Australian tax resident, tax is levied at a rate of 15% on the growth component since becoming a tax resident if you elect to pay it within your super.
*  if you transfer your funds outside six (6) months of becoming an Australian tax resident, tax is levied at your marginal tax rate on the growth component since becoming a tax resident if you wish to pay it personally or if you still have other UK pension funds remaining in the UK.
*  how you elect to have the growth component taxed will determine how much of the transfer will be counted towards your contribution caps. It is critical that this is done correctly to minimise the likelihood of an excess contribution.

What does this mean for those with UK Pensions?

You still have time to transfer your UK pension to the Australian Superannuation System if you want to or if it is right for you however time is running out. With a rush to action UK pension transfer, the usual six month wait to get the relevant information from the UK is extending further by the day. If you want to consider your options in relation to a possible transfer, you should either contact your UK pension provider directly and ask for a valuation as well as retirement projections that provide you with the final benefit options available to you at retirement such as a lifetime pension, or alternatively contact our office and we can get the information and do the sums for you to ensure that it’s the right move for your financial goals and current circumstances.