Posts Tagged ‘Pension Transfer to Australia’

A UK Final Salary Pension Transfer to Australia – What are the factors?

Saturday, February 6th, 2010

A member of a UK final salary scheme, who is looking at a pension transfer to Australia, would need to understand the benefits that their existing scheme provides before transferring to Australia. In many cases, if an individual UK pension member is confident of remaining in Australia throughout their retirement, a UK pension transfer to Australia would make sense because of the tax free and flexible benefits that an Australia superannuation scheme can provide – even if the existing benefits are in a UK final salary (defined benefit) scheme.

However, as with many other issues with migration to Australia, just because a friend or work colleague in Australia has transferred their final salary scheme to Australia does not mean that you should follow suit. Not all benefits from final salary schemes are calculated the same way for each employer – indeed, even within the scheme the factors determining your retirement benefits can change depending on when membership of the scheme commenced.

The first main factor determining your benefits is the question of what defines a final salary? Final salary or final remuneration can be defined in several different ways. This can be an individual’s last year’s earnings in the year of their retirement or date of leaving employment or the best salary in the last 5 years of employment but more commonly it is an  average of the final 3 years salary when leaving employment.

The next factor is years of service. Again, each scheme can vary in this definition. This can be based on years of service in the scheme. It could also be based on the years of service with the employer (if the member joined the pension scheme at a later date of joining employment). A member would also need to be aware how their scheme defines a ‘year’ of service – are part years counted? Are whole years only counted?

The final main factor is the accrual rate. This is the ‘fraction’ applied to each year of service, for example 1/60ths or 1/80ths, to determine the final pension. Each final salary scheme can apply a different fraction.

Putting this altogether, if an individual retires with a final salary of £90,000 and has worked for 40 years, a scheme with an accrual rate of 1/60th would provide a pension of £60,000 pa (£90,000 x 40/60ths).

The above example is a basic calculation to illustrate – and would not be the calculation used for all final salary schemes – and assessing whether a pension transfer to Australia should occur in these circumstances would largely depend on what the scheme offers as a transfer value.

Global QROPS Ltd advisers have both the experience, and importantly, the permissions from the UK financial services authority (FSA) to provide advice on pension transfers from UK final salary schemes.

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UK Pension Transfer to Australia – Residential Property Investment

Monday, February 1st, 2010

The main benefits that a UK expat pension member – who is now a permanent resident of Australia – may have when considering a UK pension transfer to Australia, is the tax free income and lump sum that that the may receive at retirement age 60 from an Australian QROPS (Qualifying Recognized Overseas Pensions Scheme).

UK expat pension member in Australia, who is several years from retirement, may consider a UK pension transfer to Australia for investment reasons rather than for the benefits that they could obtain in the future.

As far as UK pension plans are concerned certain assets held in schemes are considered ‘taxable property’. These assets include residential property, fine art, classic cars, antiques, jewellery etc. Would a pension transfer to Australia (or any other QROPS scheme) therefore, allow you to invest in something that would otherwise be deemed as taxable property in the UK?

The answer to this is no. The rules on these types of investments have been clear from day one of the QROPS legislation (6th April 2006). Investments such as residential property, within QROPS, are taxable throughout the period that the individual’s membership of the QROPS. This is an important distinction to payments to members, which are more flexible outside of the QROPS reporting period.

The major advantage of an Australia QROPS is that a member can access 100% of the fund, at retirement, after the Reporting Period. Therefore, if an individual wishes to purchase a residential property after they have received their funds from the scheme at retirement, they could have the option to do so.

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Pension Transfer to Australia – Can I contribute to my UK scheme from Australia?

Thursday, December 31st, 2009

Often an individual, who is migrating to Australia, will contribute to their UK pension pre-migration – taking advantage of the UK tax relief on contributions – and then they would affect a pension transfer to Australia at a later date in order to take advantage of the Australian QROPS  tax benefits in retirement, in Australia.

As is the case on so many occasions, with the cost of migration increasing, most people do not have the spare funds to contribute to a UK pension pre migration – no matter what the tax breaks may be. This results in a UK pension transfer to Australia being completed without maximum advantage taken from UK tax relief.

For an individual already in Australia, whose proposed UK pension transfer to Australia is not underway, there may still be an opportunity to contribute to the UK pension.

If an individual is deemed to be a relevant individual ie has relevant earnings chargeable to UK tax in that tax year, is a crown servant abroad with earnings subject to UK tax (a diplomat or soldier, for example) or has been resident in the UK in that tax year (or any of the previous 5 tax years) – a contribution could be made to an existing UK pension.

Global QROPS Ltd would like to point out, however, even if the pension member is a ‘relevant individual’ it would still depend on the pension member’s provider as to whether the individual could still contribute. If the relevant individual has no UK earnings, the likelihood is that the UK tax relief on contribution would be restricted to £3,600 per annum (should the UK provider allow the contribution).

Pension members, migrating to Australia, should take advice from Global QROPS Ltd before regarding their additional contribution options.

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Why has my UK Employer refused to complete a pension transfer to Australia?

Saturday, December 5th, 2009

For the thousands of people that migrate to Australia each year, whether a pension transfer to Australia is possible or not, may not be the foremost topic on their mind.

For those that do think of the possibility of a pension transfer to Australia, the first enquiry may be put to their employer (or the scheme administrators running their company pension scheme) or, for UK expat pension members, their former employer. In some cases, an employer (or former employer) may inform their member that a pension transfer to Australia is not possible, but are they correct to say this?

There may indeed be legitimate reasons as to why a pension transfer to Australia or to another UK scheme or even to a QROPS (Qualifying Recognized Overseas Pension Scheme) in another jurisdiction is not possible. One problem may be if an individual is within 1 year of their normal retirement from the scheme. In those circumstances an individual no long has a UK statutory right to a transfer – although the scheme trustees/administrators do have discretionary powers to grant a transfer.

Another reason may be down to the Australian scheme itself. Does the scheme feature on the list of approved QROPS that appears on the HMRC (Her Majesty’s Revenue and Customs) website? A UK scheme administrator may not see a scheme listed and refuse to transfer on this basis. Remember, however, the HMRC QROPS list is not a definitive list and should not be used as an ultimate guideline. In which case, has the scheme administrator for your UK pension asked for the receiving schemes QROPS certificate?

An individual looking at a pension transfer to Australia should speak to a specialist adviser in this field, pre migration if possible, in order to establish whether a pension transfer to Australia is possible or not.

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QROPS Technical Issue: Tax on a UK Pension Transfer to Australia

Sunday, October 11th, 2009

UK pension members with large funds, who are migrating to Australia, need to be aware of the possible high tax implications from both the Australian Tax Office (ATO) and UK Her Majesty’s Revenue and Customs (HMRC) should their UK pension transfer to Australia exceed the non-concessional cap.

The amount in a UK pension fund transferring to an Australian superannuation QROPS scheme must not exceed the Australian non-concessional cap of A$150,000 a year. The exception to this is that anyone under the age of 65 can contribute 3 years worth of the annual cap (A$450,000) in one year – providing that no subsequent transfers in or further concessional contributions are made in the following 2 years.

Should the non-concessional limit in an Australian QROPS be breached, as a result of a UK pension transfer to Australia, then the ATO charge the pension member 46.5% tax on the excess.

This chargeable amount is either paid from the scheme directly to the ATO or paid to the scheme member to pass on to the ATO to cover their tax liability. In either event, should this be paid within the QROPS 5-year reporting period, the member would be subject to an HMRC unauthorised payment charge on top of the Australian excess charge.

It is important for UK pension members to receive specialist advice from a firm such as Global QROPS Ltd, prior to migrating to Australia, to ensure they are not subject to unnecessary tax penalties in two countries.

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A UK Pension Transfer to Australia – What should I do?

Sunday, September 27th, 2009

Many people migrating from the UK to Australia each year have built up a sizeable pension fund. At some point they would look at a UK pension transfer to Australia. In some cases people would wait until they have migrated and then decide what to do with their UK pension. But is this the right thing to do?

In most cases it is not. For people to maximise their options and receive the best possible advice, they would need to approach an expert in UK pension transfers to Australia before they migrate. This is because an experienced UK authorised and regulated adviser can look at all details of your case and give an unbiased assessment of your options.

For some people, who have participated in fairly generous UK employer pension schemes, their fund could well be in excess of the annual cap permitted to transfer in to Australia. In which case, they have no choice but to keep all or part of their UK pension funds offshore from Australia. By taking advice from UK adviser’s Global QROPS Ltd, prior to leaving the UK, pension members would be able to receive solutions to the problem of the Australian cap. The solution could be UK consolidation, staggered transfers across to Australia from a UK scheme, income and tax free cash payments or other overseas pension solutions – such as the use of Qualifying Recognised Overseas Pension Schemes. All of these solutions could be in place before migration and would not be available in Australia.

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