Transfer UK pension - Jason O'Connell - Expat financial planner

Jason O'Connell

Transfer UK pension

Can you transfer a UK pension to Australia?

Yes, if you are aged between 55 and 75 years you can transfer your UK pension to Australia.

If you’re between the ages of 67 and 74, you’ll also have to meet the Work Test requirements – be employed for at least 40 hours in a period of not more than 30 consecutive days over the past financial year. However, there are some exemptions to the Work Test.

Most employer sponsored and personal pensions can be transferred to an Australian HMRC registered Qualifying Recognised Overseas Pension Scheme (QROPS), these include:

  • Occupational Pension Schemes
  • Defined Benefit (Final Salary) Schemes
  • Local Government Pension Scheme which are funded
  • Defined Contribution Schemes
  • Small Self-Administered Schemes (SSAS)
  • Self-Invested Personal Pensions (SIPP)
  • Personal Pensions
  • Inherited Pensions
  • Pensions arising from pension sharing orders

It is not possible to transfer a UK State Pension, although you’ll continue to receive fixed payments. You may however be able to maximise your entitlement to a full UK State Pension by making voluntary contributions and filling contribution gaps, both prior to and after, reaching the UK State Pension age for as little as £157 per annum.

Unfunded Civil Service Pensions are, in most cases, non-transferrable. However there are exceptional circumstances whereby it may be possible.

How do you do a pension transfer?

Whilst you may be planning on retiring down under and wish to transfer your UK pension to Australia, you need to have reached the age of 55 to do so. 

That’s because HMRC’s legislation changes in 2015 mean you’re no longer allowed to access a tax-relieved pension before 55 – the technical term for this is the ‘preservation age’.

In Australia you need to meet a condition of release – ATO to access your Superannuation savings. However, in Australia it may be possible to access superannuation retirement savings prior to meeting a condition of release – ATO and reaching preservation age, which in Australia is usually 60 (see more on preservation age from the ATO).

These conditions include:


The upshot? HMRC deregistered all Australian supers from its QROPS list in 2015. However, at the time of writing, there is one retail HMRC registered Australian QROPS superfund, though many have chosen to establish a self-managed superfund (SMSF) and register their SMSF with HMRC as a QROPS, to compliantly transfer their UK pensions to Australia.

 

Of course, you will benefit from taking advice from an Australian-based UK qualified pension transfer specialist regulated by Australian Securities and Investments Commission (ASIC).

Why it’s important to work with an Australian Regulated Financial Planner

If you are approached by an adviser about transferring your UK pension, you’ll want to ensure you are protected against the impact of poor advice that leads to a bad outcome for you.

If an adviser is not currently approved by the Australian Regulator Australian Securities and Investments Commission (ASIC), you will not have access to any redress in Australia.

How can you ensure you work with a regulated financial planner?

  1. Request a copy of their Financial Services Guide (FSG)
  2. If they are not currently approved by ASIC, you can check using the Australian Financial Adviser Register, however you will not be protected by Australian consumer protection laws designed to protect people from poor financial advice
  3. It is worth noting that there are very few financial planners in Australia with UK pensions qualifications. If you have a defined benefit pension, the qualification required to provide advice on this type of pension in the UK is known as the Level 6 Pension Transfer Qualification, with the most common accreditations being:
    • Chartered Institute of Securities and Investments (CISI) – Level 6 UK Pensions Transfer & Planning Advice (PTPA)
    • Chartered Insurance Institute (CII) – Level 6 AF7 Pensions Transfers
    • London Institute of Banking & Finance (LIBF) – Level 6 Pension Transfers (PETR)

What about transferring a final salary pension to Australia?

Another 2015 pensions change resulted in all members of Defined Benefit UK Pensions (Final Salary Schemes) being required to take regulated advice if they wanted to transfer more than £30,000.

Jason O’Connell is a Level 6 UK pension transfer & planning advice accredited pension transfer specialist – one of the very few advisers in Australia holding this accreditation.

The reason for this change was because the FCA believes it is usually unlikely to be in the member’s best interests to forgo a fixed and safeguarded retirement benefit. Furthermore, the FCA expects advisers to adopt this viewpoint as a starting point in their advice.  

In order for a recommendation to transfer a Defined Benefit Pension, the advice process must be tailored and specific to the individual member’s circumstances and life priorities, clearly demonstrating the reasons, including:

  • Why it is in your best interests to irrevocably give up a guaranteed income for life
  • Why now is the right time
  • What alternatives to transferring were considered and deemed less appropriate than a transfer

That means it’s not as simple as saying ‘I want to maximise the legacy benefit to my family in the event of my demise’, as a life insurance policy, for example, provides an alternative and cost-effective way of doing that.

Essentially, the advice process must clearly demonstrate why transferring your Defined Benefit Pension is likely to result in a better outcome than retaining such valuable guaranteed benefits.

Consumer protection and adviser obligations under Australian Laws

In Australia, under the Corporations Act and The Financial Adviser Standard and Ethic Authority (FASEA) code of ethics and standards, there are several provisions and standards that, by law, are required as part of any recommendations you receive. Some highlights are:

  • To demonstrate how the recommendations are in your best interests, and appropriate to your individual circumstances and objectives.
  • An adviser must develop, maintain and apply a high level of relevant knowledge and skills. For example, if the adviser specialises in a particular area, they should not provide advice outside of that area, unless they have the necessary skills and competencies to do so in a professional way.
  • An adviser must not act where there is a conflict of interest, such as gaining commission for non-insurance advice.
  • The adviser must take into account the broad effects arising from you acting upon their advice and actively consider the client’s broader, long-term interests and likely circumstances.
  • Demonstrate how acting on any recommendation given will put you, the client, in a better position.
  • The adviser may act for you only with your free, prior and informed consent.
  • All advice provided, and all products they recommend to you, must be offered in good faith and with competence, being neither misleading nor deceptive.

Is UK pension transfer the right choice for you?

Deciding whether to transfer your UK retirement savings to Australia requires a thorough planning process tailored to you as an individual.

There are many considerations to take into account:

  • The type of UK pension in question
  • The rules in the UK
  • The rules in Australia
  • Taxation
  • Flexible access
  • Investment options
  • Currency risk i.e., holding retirement savings in a foreign currency
  • Timing
  • Your retirement life goals
  • Legacy planning

With so many variables, you can begin to see that there’s no easy answer to the question – just as deciding whether to relocate you and your family to Australia probably wasn’t either!

Understanding currency risk

This is a big factor in a lot of people’s decisions. 

Many people are concerned about holding valuable retirement provisions in a foreign currency.

You may believe that the current GBP exchange rate is undervalued, and it will increase in value against the AUD. Or, that the GBP may decrease against the AUD, given the uncertainty on the short to medium direction of the UK economy outside of the EU after Brexit. It could be that neither are a strong basis for years of happy retirement – and it’s why a high percentage of expats want to move their pension pots with them.

There are so many variables which can influence a currency exchange rate on both sides of the pairing, and movements in exchange rates can be very volatile – particularly in the shorter term. 

Planning and investing for your retirement is not without risk, though the worry and risk of being exposed to fluctuations in exchange rates are unnecessary and easily avoidable with the right solution, whether that’s in the UK or Australia. Trying to predict whether GBP will increase or decrease versus AUD is impossible, particularly at a certain time and point in your life such as retirement. 

For many people, being able to align your UK retirement savings with the currency of the country you now live in, and intend on retiring in, offers certainty.

There are other benefits too:

  • You can transfer tax free – if you do it within 6 months of becoming an Australian resident
  • You can flexibly draw your pension benefits in retirement
  • From the age of 60, where the foreign super transfer has been taxed, the income benefits are generally tax-free
  • When you die (though let’s not think about that) your pension won’t be subject to UK Income Tax, however depending on your circumstances, there may be taxes due in Australia

Speaking of tax – you’ll need to make sure you meet HMRC criteria on reportable events when you start withdrawing funds in Australia, to ensure your QROPS remains compliant and you have the necessary arrangements in place so don’t get taxed twice.

This may involve securing what is known as a UK NT code, which effectively transfers the taxing rights (where covered under a taxation treaty with your country of residence) to Australia.

How much does it cost to transfer your UK pension to Australia?

There’s an Overseas Transfer Charge (OTC) of 25%, though where the member is resident in the same country in which the QROPS receiving the transfer is established, the transfer is exempt. However, there are other conditions that apply:

  • The member must provide the scheme administrator with all the required prescribed information;
  • A transfer will also become subject to the OTC if the member is no longer a resident within the first five full UK tax years of a transfer being made i.e. the transfer is made on 6 April, five years from that date, or;
  • Where the transfer is made on any other date, the period from that date until the next 5 April plus a further five years from 6 April. For example, if the transfer is made on 13 June 2021, the relevant period runs until 5 April 2027 (13 June 2021 – 5 April 2022 plus 6 April 2022 – 5 April 2027).

After that, it depends on providers. Your UK pension provider may charge you for the outward transfer, while some Australian providers may administer both establishment fees as well as any ongoing fees.

There will also be a fee for the services of the adviser(s) assisting you with a transfer, the cost of the underlying investment strategy, as well as any ongoing advice. 

The bottom line is, whatever the cost, you should have clear evidence of how the costs are fair, offer value for money and are aligned with the level of complexity and time involved in the advice process – which must clearly demonstrate how acting upon any recommendation will likely place you in a better position.

It may be possible for the fees to be paid from your pension arrangements, and if you are dealing with an Australian regulated adviser, there must be no conflict of interest or conflicted remuneration. For example, the only person paying your adviser must be you, the client, and no commissions or enduements can be received from a product provider or fund manager.  

What about QROPS? Do you need one?

QROPS are one of the most effective ways of transferring your pension, you can read more about QROPS here.

However, it is important to note that QROPS are not for everyone, and any decision to transfer to a QROPS should only be arrived at after careful consideration and a thorough advice process. Depending on your circumstances, it may be in your best interests to keep some (or all) of your pension benefits in the UK.

Can I transfer my pension to Australia on my own or do I need a financial adviser?

If you have a defined contribution employer sponsored or pension(s), then yes, you may be able to do it on your own. You should check the requirements with your pension schemes and confirm whether they require you to take regulated advice and whether a UK regulated adviser is required. 

There are some legal requirements to consider, for example, if you have a UK Defined Benefit Pension (Final Salary) with a transfer value of £30,000 and above, by law you need to prove to the ceding scheme that you have received independent Appropriate Pension Transfer Analysis (APTA) by a suitably qualified and FCA licensed pension transfer specialist.

Information on this website is general advice and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.

Can you transfer UK pension to Australia?

Yes, if you are aged between 55 and 75 years you can transfer your UK pension to Australia.

If you’re between the ages of 67 and 74, you’ll also have to meet the Work Test requirements – be employed for at least 40 hours in a period of not more than 30 consecutive days over the past financial year. However, there are some exemptions to the Work Test.

Most employer sponsored and personal pensions can be transferred to an Australian HMRC registered Qualifying Recognised Overseas Pension Scheme (QROPS), these include:

  • Occupational Pension Schemes
  • Defined Benefit (Final Salary) Schemes
  • Local Government Pension Scheme which are funded
  • Defined Contribution Schemes
  • Small Self-Administered Schemes (SSAS)
  • Self-Invested Personal Pensions (SIPP)
  • Personal Pensions
  • Inherited Pensions
  • Pensions arising from pension sharing orders

It is not possible to transfer a UK State Pension, although you’ll continue to receive fixed payments. You may however be able to maximise your entitlement to a full UK State Pension by making voluntary contributions and filling contribution gaps, both prior to and after, reaching the UK State Pension age for as little as £157 per annum.

Unfunded Civil Service Pensions are, in most cases, non-transferrable. However there are exceptional circumstances whereby it may be possible.

How do you do a pension transfer?

Whilst you may be planning on retiring down under and wish to transfer your UK pension to Australia, you need to have reached the age of 55 to do so. 

That’s because HMRC’s legislation changes in 2015 mean you’re no longer allowed to access a tax-relieved pension before 55 – the technical term for this is the ‘preservation age’.

In Australia you need to meet a condition of release – ATO to access your Superannuation savings. However, in Australia it may be possible to access superannuation retirement savings prior to meeting a condition of release – ATO and reaching preservation age, which in Australia is usually 60 (see more on preservation age from the ATO).

These conditions include:

The upshot? HMRC deregistered all Australian supers from its QROPS list in 2015. However, at the time of writing, there is one retail HMRC registered Australian QROPS superfund, though many have chosen to establish a self-managed superfund (SMSF) and register their SMSF with HMRC as a QROPS, to compliantly transfer their UK pensions to Australia.

Of course, you will benefit from taking advice from an Australian-based UK qualified pension transfer specialist regulated by Australian Securities and Investments Commission (ASIC).

Why it’s important to work with an Australian Regulated Financial Planner

If you are approached by an adviser about transferring your UK pension, you’ll want to ensure you are protected against the impact of poor advice that leads to a bad outcome for you.

If an adviser is not currently approved by the Australian Regulator Australian Securities and Investments Commission (ASIC), you will not have access to any redress in Australia.

How can you ensure you work with a regulated financial planner?

  1. Request a copy of their Financial Services Guide (FSG)
  2. If they are not currently approved by ASIC, you can check using the Australian Financial Adviser Register, however you will not be protected by Australian consumer protection laws designed to protect people from poor financial advice
  3. It is worth noting that there are very few financial planners in Australia with UK pensions qualifications. If you have a defined benefit pension, the qualification required to provide advice on this type of pension in the UK is known as the Level 6 Pension Transfer Qualification, with the most common accreditations being:
    • Chartered Institute of Securities and Investments (CISI) – Level 6 UK Pensions Transfer & Planning Advice (PTPA)
    • Chartered Insurance Institute (CII) – Level 6 AF7 Pensions Transfers
    • London Institute of Banking & Finance (LIBF) – Level 6 Pension Transfers (PETR)

What about transferring a final salary pension to Australia?

Another 2015 pensions change resulted in all members of Defined Benefit UK Pensions (Final Salary Schemes) being required to take regulated advice if they wanted to transfer more than £30,000.

Jason O’Connell is a Level 6 UK pension transfer & planning advice accredited pension transfer specialist – one of the very few advisers in Australia holding this accreditation.

The reason for this change was because the FCA believes it is usually unlikely to be in the member’s best interests to forgo a fixed and safeguarded retirement benefit. Furthermore, the FCA expects advisers to adopt this viewpoint as a starting point in their advice.  

In order for a recommendation to transfer a Defined Benefit Pension, the advice process must be tailored and specific to the individual member’s circumstances and life priorities, clearly demonstrating the reasons, including:

  • Why it is in your best interests to irrevocably give up a guaranteed income for life
  • Why now is the right time
  • What alternatives to transferring were considered and deemed less appropriate than a transfer

That means it’s not as simple as saying ‘I want to maximise the legacy benefit to my family in the event of my demise’, as a life insurance policy, for example, provides an alternative and cost-effective way of doing that.

Essentially, the advice process must clearly demonstrate why transferring your Defined Benefit Pension is likely to result in a better outcome than retaining such valuable guaranteed benefits.

Consumer protection and adviser obligations under Australian Laws

In Australia, under the Corporations Act and The Financial Adviser Standard and Ethic Authority (FASEA) code of ethics and standards, there are several provisions and standards that, by law, are required as part of any recommendations you receive. Some highlights are:

  • To demonstrate how the recommendations are in your best interests, and appropriate to your individual circumstances and objectives.
  • An adviser must develop, maintain and apply a high level of relevant knowledge and skills. For example, if the adviser specialises in a particular area, they should not provide advice outside of that area, unless they have the necessary skills and competencies to do so in a professional way.
  • An adviser must not act where there is a conflict of interest, such as gaining commission for non-insurance advice.
  • The adviser must take into account the broad effects arising from you acting upon their advice and actively consider the client’s broader, long-term interests and likely circumstances.
  • Demonstrate how acting on any recommendation given will put you, the client, in a better position.
  • The adviser may act for you only with your free, prior and informed consent.
  • All advice provided, and all products they recommend to you, must be offered in good faith and with competence, being neither misleading nor deceptive.

Is UK pension transfer the right choice for you?

Deciding whether to transfer your UK retirement savings to Australia requires a thorough planning process tailored to you as an individual.

There are many considerations to take into account:

  • The type of UK pension in question
  • The rules in the UK
  • The rules in Australia
  • Taxation
  • Flexible access
  • Investment options
  • Currency risk i.e., holding retirement savings in a foreign currency
  • Timing
  • Your retirement life goals
  • Legacy planning

With so many variables, you can begin to see that there’s no easy answer to the question – just as deciding whether to relocate you and your family to Australia probably wasn’t either!

Understanding currency risk

This is a big factor in a lot of people’s decisions. 

Many people are concerned about holding valuable retirement provisions in a foreign currency.

You may believe that the current GBP exchange rate is undervalued, and it will increase in value against the AUD. Or, that the GBP may decrease against the AUD, given the uncertainty on the short to medium direction of the UK economy outside of the EU after Brexit. It could be that neither are a strong basis for years of happy retirement – and it’s why a high percentage of expats want to move their pension pots with them.

There are so many variables which can influence a currency exchange rate on both sides of the pairing, and movements in exchange rates can be very volatile – particularly in the shorter term. 

Planning and investing for your retirement is not without risk, though the worry and risk of being exposed to fluctuations in exchange rates are unnecessary and easily avoidable with the right solution, whether that’s in the UK or Australia. Trying to predict whether GBP will increase or decrease versus AUD is impossible, particularly at a certain time and point in your life such as retirement. 

For many people, being able to align your UK retirement savings with the currency of the country you now live in, and intend on retiring in, offers certainty.

There are other benefits too:

  • You can transfer tax free – if you do it within 6 months of becoming an Australian resident
  • You can flexibly draw your pension benefits in retirement
  • From the age of 60, where the foreign super transfer has been taxed, the income benefits are generally tax-free
  • When you die (though let’s not think about that) your pension won’t be subject to UK Income Tax, however depending on your circumstances, there may be taxes due in Australia

Speaking of tax – you’ll need to make sure you meet HMRC criteria on reportable events when you start withdrawing funds in Australia, to ensure your QROPS remains compliant and you have the necessary arrangements in place so don’t get taxed twice.

This may involve securing what is known as a UK NT code, which effectively transfers the taxing rights (where covered under a taxation treaty with your country of residence) to Australia.

How much does it cost to transfer your UK pension to Australia?

There’s an Overseas Transfer Charge (OTC) of 25%, though where the member is resident in the same country in which the QROPS receiving the transfer is established, the transfer is exempt. However, there are other conditions that apply:

  • The member must provide the scheme administrator with all the required prescribed information;
  • A transfer will also become subject to the OTC if the member is no longer a resident within the first five full UK tax years of a transfer being made i.e. the transfer is made on 6 April, five years from that date, or;
  • Where the transfer is made on any other date, the period from that date until the next 5 April plus a further five years from 6 April. For example, if the transfer is made on 13 June 2021, the relevant period runs until 5 April 2027 (13 June 2021 – 5 April 2022 plus 6 April 2022 – 5 April 2027).

After that, it depends on providers. Your UK pension provider may charge you for the outward transfer, while some Australian providers may administer both establishment fees as well as any ongoing fees.

There will also be a fee for the services of the adviser(s) assisting you with a transfer, the cost of the underlying investment strategy, as well as any ongoing advice. 

The bottom line is, whatever the cost, you should have clear evidence of how the costs are fair, offer value for money and are aligned with the level of complexity and time involved in the advice process – which must clearly demonstrate how acting upon any recommendation will likely place you in a better position.

It may be possible for the fees to be paid from your pension arrangements, and if you are dealing with an Australian regulated adviser, there must be no conflict of interest or conflicted remuneration. For example, the only person paying your adviser must be you, the client, and no commissions or enduements can be received from a product provider or fund manager.  

What about QROPS? Do you need one?

QROPS are one of the most effective ways of transferring your pension, you can read more about QROPS here.

However, it is important to note that QROPS are not for everyone, and any decision to transfer to a QROPS should only be arrived at after careful consideration and a thorough advice process. Depending on your circumstances, it may be in your best interests to keep some (or all) of your pension benefits in the UK.

Can I transfer my pension to Australia on my own or do I need a financial adviser?

If you have a defined contribution employer sponsored or pension(s), then yes, you may be able to do it on your own. You should check the requirements with your pension schemes and confirm whether they require you to take regulated advice and whether a UK regulated adviser is required. 

There are some legal requirements to consider, for example, if you have a UK Defined Benefit Pension (Final Salary) with a transfer value of £30,000 and above, by law you need to prove to the ceding scheme that you have received independent Appropriate Pension Transfer Analysis (APTA) by a suitably qualified and FCA licensed pension transfer specialist.

Information on this website is general advice and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.

Seek professional expertise

Keep in mind that this is your livelihood and you probably can’t afford to make mistakes. It’s always recommended that you seek professional support and advice.

Working with Jason, you’ll also get the benefit of a tailored solution that doesn’t just stop when the money is transferred. Find out more about how it works.

Seek professional expertise

Keep in mind that this is your livelihood and you probably can’t afford to make mistakes. It’s always recommended that you seek professional support and advice.

Working with Jason, you’ll also get the benefit of a tailored solution that doesn’t just stop when the money is transferred. Find out more about how it works.