How to claim a British pension in Australia - Jason O'Connell

Jason O'Connell

How to claim a British pension in Australia

How to claim British pension in Australia

These are the general steps you need to take if:

  • You’re over 55
  • You want to transfer your employer sponsored company UK pension or your personal UK pension fund to a qualifying Australian superannuation fund

1. Check your UK pension provider(s) will allow it

Some UK pension providers may have transfer restrictions or charges. Moreover, you may not be able to transfer your pension at all if you have deferred benefits in an unfunded public servant pension. These normally apply to police officers, NHS workers and some teachers.

Be mindful that if you have a defined benefit/final salary UK pension, then in order to transfer it, you will need to provide proof to the trustees of the scheme that you have received Appropriate Pension Transfer Advice from a suitably regulated and qualified UK pension transfer specialist – and that specialist will be required to make an advice declaration. The trustees of the pension will carry out due diligence on your adviser to ensure you have complied with the FCA’s requirements, and that they are regulated to provide advice on defined benefit pensions.

You will also need the correct paperwork to transfer to an Australian QROPS. The FCA have issued guidance to UK pension trustees to be aware of any red flags, which may suggest a pension scam. Most UK schemes will conduct due diligence on the circumstances which have led you to deciding to transfer your pension overseas.

Most UK advisers are not qualified, licensed or insured to give advice to Australian consumers. Even those who are often have little or no knowledge of Australian dollar-denominated investments, meaning they are unlikely to be able to provide the full solution required by an Australian resident. Advice on whether a pension transfer is right for you is just part of the puzzle and the beginning an advice journey. It is just as important to analyse your options, mitigate the risk of being exposed to currency fluctuations and obtain advice on an Australian dollar-denominated investment strategy.

Finally, if you have entered the payment phase of your pension, you may not be eligible to transfer.

To ensure you fully understand the impact of transferring a British pension to Australia, particularly around your individual circumstances, you may benefit – and take comfort from – working with an Australia-based adviser with the skills, experience and qualifications in this highly specialist area of retirement planning.

2. Familiarise yourself with QROPS

To move your pension without major penalties, you need to find a scheme registered by HMRC as a Qualifying Recognised Overseas Pension Scheme (QROPS).

Handily, the HMRC has a list of Australian super funds that are QROPS.

There is just one superfund on the list that isn’t a self-managed super fund (SMSF), because most large mainstream Australian industry, retail and public sector supers fail to meet the requirements i.e. they allow membership to under 55s and they allow you to withdraw before 55 years under specific circumstances.

3. Get a QROPS SMSF

This is jumping ahead quite a bit here. You should always seek advice and guidance that is tailored to your current circumstances and considers the finer details. It may be that a super isn’t the best fit for you and your plans.

However, if you want a SMSF and you feel it is the right thing to do – even knowing the costs – then you need to set one up.

The Australian Taxation Office defines outlines this process:

  • Seek professional guidance
  • Select and appoint your trustees
  • Create the trust and trust deed
  • Ensure you meet the Australian super fund requirements
  • Register your fund and get an Australian Business Number
  • Set up a bank account
  • Get an electronic service address
  • Prepare an investment strategy
  • Prepare an exit strategy

If you already have a SMSF, you will still need advice, as you will need to change your fund’s trust deed to comply with QROPS requirements.

4. Apply to HMRC

You need to notify HMRC that the scheme is a QROPS in accordance with Section 150(8) and Section 169 Finance Act 2004. Registering your SMSF as a QROPS and acquiring approval typically takes a month or two.

You will need to ensure that you understand the reporting requirement i.e. what events you will need to notify HMRC of on an ongoing basis for the 10 year reporting period. There are QROPS administrators in Australia who can assist with this and ensure that your QROPS remains compliant at all times, in order to avoid breaching the rules and potentially triggering unnecessary tax charges for non-compliance.

5. Move the money

Once you’ve registered your SMSF with HMRC QROPS, you can apply to transfer your UK pension funds.

At this point, it is best to seek professional advice once more. Cross-border pension transfers can be specialist and complex.

Remember, your case will be different

As you can imagine, the transfer of your British pension to a QROPS SMSF might not be straightforward, and that’s without taking into account your needs, your financial situation, and your goals for retirement.

It’s important that your expectations are set in the right place when you begin, as you may face some challenges along the way. However, once you understand the process and its complexities, these challenges can be managed and overcome with the right approach.

The information in this article provides a general guide to the steps it takes to claim a British pension in Australia by transferring it, but always seek help and guidance from an independent financial advisor – it’s just too important to get wrong.

Get in touch to find out how Jason can help you.

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