Advice for Expats on the safe transfer of UK pension assets

HOW TO TRANSFER PENSIONS SAFELY FROM THE UK

New regulations governing the transfer of United Kingdom pensions out of the country can potentially have a significant affect on the retirement incomes of expatriates now working in Australia.

According to a financial adviser who specialises in United Kingdom pension transfers, the new rules, which came into effect for the new British tax year on April 6, can result in heavier tax penalties and consequently, a smaller retirement nest egg for some expatriates.

McKinley Plowman & Associates, United Kingdom Pensions Transfer Manager Colette Pieniazek said obtaining the right professional advice about transferring or investing pension assets could save you thousands of dollars in tax and ultimately a far more comfortable retirement.

Ms Pieniazek, who immigrated to Perth from Britain over eight years ago, said while expatriates had a lot to gain from transferring their pensions into Australian Qualifying Regulated Overseas Pension Scheme (QROPS) funds, it was critical for them to understand how the latest changes would affect them.

She said the new rules required for the receiving QROPS scheme to report members’ withdrawals to HM Revenue & Customs (HMRC) for ten years after their pension was transferred to Australia.

Under previous regulations the Australian pension scheme was only required to report withdrawals for five UK tax years from the date of residency here. Ms Pieniazek said the rule changes would be retrospective, so expatriates who had already transferred their British pensions into Australian QROPS funds would also need to be aware of the longer reporting requirements and their taxation implications.

“This means that if you make a withdrawal from your transferred UK pension within this time period and it is outside prescribed UK limits then you will face an unauthorised tax charge of 55% by HMRC,” Ms Pieniazek said.

“It is absolutely vital that those who intend to either retire or plan to draw on their former UK funds within the next ten years seek professional advice now.”

GETTING THE RIGHT ADVICE IS PARAMOUNT

Ms Pieniazek said with the right professional advice immigrants could safely transfer their pension to Australia in a tax effective way and be better off in retirement. She said McKinley Plowman and Associates was now providing expatriates with a free no-obligation report on the different financial and tax outcomes of leaving their pension in Britain or transferring it to Australia.

She said transferring British pensions to an Australian Qualifying Regulated Overseas Pension Scheme (QROPS) offered many benefits including a tax-free income in retirement, flexible investment opportunities, potentially higher returns, freedom from exchange rate fluctuations and long-term asset protection.

Unlike the British pension funds, Australian funds allowed pension holders to pass on their entire fund balance to a spouse or beneficiaries after death.

Ms Pieniazek said it was important to begin the pension transfer process, which usually took up to four months, as soon as Australian residency was obtained. Pension transfers made within six months of obtaining residency did not incur Australian tax; however those made after this period were subject to a 15% tax.

This tax applied to any capital gain made by the UK pension between the time an individual moved to Australia and the time the pension funds arrived here.

“Also, Australians can take 100% of their super tax free at age 60, whereas UK laws only allow for 25% to be taken as a lump sum.”

If you would like a free detailed Report and Tax Analysis comparison , then please email pensions@mckinleyplowman.com.au or should you require any further information then please call Colette on 08 9301 2200.

New In Town works closely with professional organisations to ensure that everything is taken care of.  For assistance with relocating from the United Kingdom, call New In Town Relocations - 1300 912 112 or email our Relocations Team.