Transfer UK private pension to Australia

[TJT]

I have some questions regarding private pension scheme in the UK. I am over 55 years old.

1. I am going to remain in Australia, does it make financial sense to move the private pension over to an Australian super fund?

2. I can take a 25% tax free lump sum in the UK since turning 55. Is this taxable in Australia if I move it over?

3. How do agents that help to move pensions across and give tax and financial advice make their money when providing their services?

Regards

TJT

[Marisawright]

It can get horribly complicated and people have lost an awful lot of money by trying to do it themselves.  I suggest you book a consultation with @Andrew from Vista Financial to look into your particular situation.  It will cost you a fee but it could save you thousands.

And that's how agents make their money - by charging you a fee for advice and to make the arrangements. If you come across an agent who is offering to advise you/organise it free of charge, they are a con artist, being paid by some dodgy firm to entrap customers - don't touch them with a bargepole. 

Currently there's only one Australian super fund you can transfer the money to anyway, and it's run by some investment company I've never heard of.  Personally I'd be a bit anxious about that, but maybe that's just me being over-cautious.  Andrew can advise.

If you take a lump sum, yes, it will be taxable in Australia. The bad news is that it will be taxable in Australia even if you don't move it over. The rule is that you're liable to pay Australian tax on ALL your earnings, no matter where in the world they're earned or where the money is.  

Edited August 1, 2021 by Marisawright

[NicF]

My OH moved his pension last year with @Andrew from Vista Financial.  There is a lot involved in the process, especially if your UK is a final salary one.  He moved his to the retail fund here in Australia and so far it has performed pretty well.  The only other alternative is to move it to a SMSF but we were not keen on this option.  There is a fee but it was taken from the funds that were moved rather than us having to find the money separately.

[Ken]

2 hours ago, TJT said:

I have some questions regarding private pension scheme in the UK. I am over 55 years old.

1. I am going to remain in Australia, does it make financial sense to move the private pension over to an Australian super fund?

2. I can take a 25% tax free lump sum in the UK since turning 55. Is this taxable in Australia if I move it over?

3. How do agents that help to move pensions across and give tax and financial advice make their money when providing their services?

Regards

TJT

1. Probably - but it's complicated there are pros and cons and it depends upon what exchange rates do in the future.

2. If you take the lump sum it's taxable in Australia whether you move it over or not - however only the Applicable Fund Earnings (AFE) on the lump sum are taxable. If you take 100% of your pension fund as a lump sum then the AFE is the amount the pension fund grew since you became resident in Australia. The part that existed before you moved to Australia is tax free. However if you only draw down part of the fund then amount you draw down comes out of the AFE first and the tax free portion later. What that means is that if your fund has grown by a third or more since you moved to Australia the entire first 25% (the part that is Tax Free in the UK) is taxed and so if you only wanted to take that 25% it would all be taxed.

One strategy to minimise tax (works well for smallish pension balances but not so well for large ones) is to take the lump sum in the UK and then pay the taxed portion in to your Super fund and claim a tax deduction for it. There are however strict rules on how to go about doing this and the amount you can do it with is capped, but if your total Super fund is under $500K you can make use of Unused Concessional Contribution Caps from previous years (FY2018 to FY2021 = 4 years of up to $25,000 each) plus the current year's $27,500. Note however that any SGC contributions by your employer come out of this Cap as well any contributions you make. Your super fund will pay 15% tax on the amount received but your tax saving should be a lot larger. Don't forget that any tax you have to pay in the UK (because you've taken more than 25% and you've gone over your UK tax free allowance) is an offset towards your Australian tax bill.

3. They charge fees, earn commissions or both.

Edited August 1, 2021 by Ken

[Tulip1]

26 minutes ago, Ken said:

1. Probably - but it's complicated there are pros and cons and it depends upon what exchange rates do in the future.

2. If you take the lump sum it's taxable in Australia whether you move it over or not - however only the Applicable Fund Earnings (AFE) on the lump sum are taxable. If you take 100% of your pension fund as a lump sum then the AFE is the amount the pension fund grew since you became resident in Australia. The part that existed before you moved to Australia is tax free. However if you only draw down part of the fund then amount you draw down comes out of the AFE first and the tax free portion later. What that means is that if your fund has grown by a third or more since you moved to Australia the entire first 25% (the part that is Tax Free in the UK) is taxed and so if you only wanted to take that 25% it would all be taxed.

One strategy to minimise tax (works well for smallish pension balances but not so well for large ones) is to take the lump sum in the UK and then pay the taxed portion in to your Super fund and claim a tax deduction for it. There are however strict rules on how to go about doing this and the amount you can do it with is capped, but if your total Super fund is under $500K you can make use of Unused Concessional Contribution Caps from previous years (FY2018 to FY2021 = 4 years of up to $25,000 each) plus the current year's $27,500. Note however that any SGC contributions by your employer come out of this Cap as well any contributions you make. Your super fund will pay 15% tax on the amount received but your tax saving should be a lot larger. Don't forget that any tax you have to pay in the UK (because you've taken more than 25% and you've gone over your UK tax free allowance) is an offset towards your Australian tax bill.

3. They charge fees, earn commissions or both.

Very helpful, thanks. 

[Andrew from Vista Financial]

21 hours ago, TJT said:

I have some questions regarding private pension scheme in the UK. I am over 55 years old.

1. I am going to remain in Australia, does it make financial sense to move the private pension over to an Australian super fund?

2. I can take a 25% tax free lump sum in the UK since turning 55. Is this taxable in Australia if I move it over?

3. How do agents that help to move pensions across and give tax and financial advice make their money when providing their services?

Regards

TJT

Hello

1) Yes this would vary from person to person, it may or may not.

2) Yes UK rules permit access from age 55 on private pensions and yes for perm residents/citizens this is assessed in Australia for tax.

3) Licensed Australian Financial planners work on an agreed fee (not commission) for Advice and if a transfer is recommended a further agreed fee (not commission) for them to implement. Typically the fee can be deducted from the transferred funds if a transfer occurs, if a transfer is not recommended or a better alternative strategy exists (Ken above touched on a potential one) then the Advice fee may need to be paid directly or deducted from a different super fund if the strategy involves contributions to it.

Hope this helps.

Andy

  

[Andrew from Vista Financial]

34 minutes ago, Andrew from Vista Financial said:

Hello

1) Yes this would vary from person to person, it may or may not.

2) Yes UK rules permit access from age 55 on private pensions and yes for perm residents/citizens this is assessed in Australia for tax.

3) Licensed Australian Financial planners work on an agreed fee (not commission) for Advice and if a transfer is recommended a further agreed fee (not commission) for them to implement. Typically the fee can be deducted from the transferred funds if a transfer occurs, if a transfer is not recommended or a better alternative strategy exists (Ken above touched on a potential one) then the Advice fee may need to be paid directly or deducted from a different super fund if the strategy involves contributions to it.

Hope this helps.

Andy

  

P.S

Non Australian Advisers may work on commissions and in a lot of cases these will not be fully disclosed and can be very high which is a terrible practice (ultimately commissions result in higher product fees which then directly erode your money), therefore best bet is to work with either an Australian (ASIC) or UK (FCA) regulated Adviser.

Edited August 2, 2021 by Andrew from Vista Financial

[TJT]

Thank you everyone. The bit I was most frustrated hearing about was the tax on the whole pension amount (growth since I landed) even if I am only taking 25% out. I guess I need to pay to talk to someone here in Australia. Thanks for the tips.

 

 

 

[TJT]

Thank you everyone. The bit I was most frustrated hearing about was the tax on the whole pension amount (growth since I landed) even if I am only taking 25% out. I guess I need to pay to talk to someone here in Australia. Thanks for the tips.

 

Edit: I tried to message Andrew within this forum but says I cant do that. Is there a restriction for new members?

 

 

 

[Andrew from Vista Financial]

17 minutes ago, TJT said:

Thank you everyone. The bit I was most frustrated hearing about was the tax on the whole pension amount (growth since I landed) even if I am only taking 25% out. I guess I need to pay to talk to someone here in Australia. Thanks for the tips.

 

Edit: I tried to message Andrew within this forum but says I cant do that. Is there a restriction for new members?

 

 

 

Hi

I believe that there is a requirement for a certain amount of posts before being able to PM but not sure what that number is.

 

Anyhoo, you are able to reach me on Andrew@vistafs.com.au  :)