Rules for British pensions in Australia | Jason O'Connell

Jason O'Connell

Rules for British pensions in Australia

Rules for British pensions in Australia

For many, retirement is about living life on your own terms, with as few rules dictating what you can and can’t do as possible.

However, if you’re planning your retirement in Australia, it helps if you take these 6 rules for British pensions in Australia into account.

Rule 1: You can transfer your company / private pension, but not your state pension

That’s because the state pension is simply a regular income from a contributory based state pension scheme that you pay into via National Insurance contribution, so you don’t have a ‘pot’ to transfer.

That said, you can still claim it from Australia – you can even claim that and the Australian Age Pension at the same time.

You don’t have to stop working or have any other income restrictions to receive the state pension, but for recipients residing in Australia, annual indexation will cease being applied once you are in receipt of benefits.

Rule 2: Find out if a QROPS is right for you

There are lots of mini rules tied up in this one big bit of legislation.

Seek advice on whether transferring your UK pension to join you in Australia is right for you. To do this without incurring penalties, the super needs to be a Qualifying Recognised Overseas Pension Scheme (QROPS) in Australia. 

Changes to the UK pensions laws in April 2015 resulted in all of the QROPS super funds at that time being delisted by HMRC, making them ineligible to receive further transfers from UK pensions. This was mainly because most supers allow you to withdraw money in the event of ill health or hardship – something UK pensions prevent until you are 55.

Since then, the volume of QROPS in Australia has increased, giving you more options to find a scheme that fits with your retirement plans and remaining life goals.

To be eligible to transfer to a QROPS you need to be: 

  • 55 but not older than 65 years, unless employed in Australia, and the trust deeds of the QROPS must only allow membership to those over 55 years
  • Funded employer sponsored company or personal UK pension schemes, Self-Invested Personal Pensions (SIPPs), and final salary can be moved to a QROPS
  • UK annuities can’t be transferred
  • Where a UK pension has begun paying a pension payment, it will depend on that fund whether it can be transferred to an Australian QROPS
  • Moving less than AUS$1.6 million in your lifetime
  • A tax resident in Australia – you’ll also need to remain a tax resident for at least 5 full UK tax years, or the transfer will retrospectively become subject to the overseas transfer charges (25% of the funds transferred)

Rule 3: Check the super options

You can find a full list of Australian super funds that say they have met QROPS requirements and are registered with HMRC. 

Although things change from year to year, most of these funds will be self-managed super funds (SMSFs). As mentioned, QROPS require specific criteria, namely not being able to withdraw until 55 years of age, and most large mainstream Australian industry, retail and public sector funds do not prevent this under certain circumstances.

That said, because you might need a SMSF QROPS, that doesn’t mean you don’t have a choice. Plus, there are costs and compliance obligations to think about too. 

You can work alongside Jason to maximise efficiencies and make sure you have a super that’ll work towards your retirement goals.

Rule 4: Seek tax advice

Tax advice can make or break your retirement plans.

You really can’t afford to get it wrong and any efficiencies achieved could make your retirement all the more enjoyable.

It’s not just pensions you need to think about with tax either, it’s really important to understand the big picture of your portfolio and income streams – and that’s tough to do on your own.

Depending on the complexities, it may be advisable to take UK tax advice and even apply for a private binding ruling (PBR) from the ATO, particularly where the combined balance of your UK pensions and Australian Superannuations are in excess of the Australian Superannuation balance cap. The same can be said where your UK pension is in excess of the Lifetime Allowance (LTA) in the UK.

Indeed, it’s recommended that you seek guidance. Jason and his team have extensive knowledge of cross border pension transfer rules, Australian superannuation plans, and wider tax implications.

Rule 5: Pension income does not equal retirement income

When weighing up your options and transferring your pension to Australia, don’t do it in isolation. You have to think about all of your income sources to make the most of your money and understand that maximising your retirement wealth won’t simply be about generating the biggest super fund. 

One of the things that Jason can help you do, is manage your entire portfolio – both to maximise your wealth, but also ensure you are investing in ventures you can derive additional pleasure or pride from.

Rule 6: Enjoy retirement

When you’re deep in DTTs and QROPS options, remember what this is all about.

It’s about moving to Australia to enjoy your retirement. Do the work now: research everything, seek guidance from the likes of Jason, make your plans with your goals in mind and, the majority of your retirement will be far more fulfilling than if you were less meticulous in your preparations.

Having worked alongside hundreds of Irish and British expats in the past, Jason knows that if you always focus on your life goals, and then plan your finances around them, the chances of success and zero regrets are much higher.

A helping hand

Having worked alongside hundreds of Irish and British expats in the past, Jason knows that if you always focus on your life goals, and then plan your finances around them, the chances of success and zero regrets are much higher.

If you’d like to talk to Jason about your retirement in Australia, get in touch.

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