Have you lived or worked in the UK? Need help with UK pension transfers to Australia? Please find below answers to some common questions. For further information, please click here for your free Pension Transfer Ebook.
What is a transfer value?
UK defined benefit schemes use an actuary to calculate your UK pension transfer. They convert the amount of pension you have accrued into a cash equivalent UK pension transfer value. UK defined contribution schemes, such as a personal pension, use the current value of your investment funds accrued as your UK pension transfer value. In both cases, the UK pension transfer is full and final settlement of the benefits you have accrued within the scheme and releases the scheme of all liability for your membership.
Is the transfer value amount guaranteed?
UK defined benefit schemes are based on complex formulas, as such transfer values are guaranteed for a period of 3 months from the date of calculation. As there are a number of steps involved with transferring a defined benefit scheme, such as obtaining UK financial advice, it is important you contact us if you have already received a transfer value.
UK defined contribution schemes use the current value of your investment funds and therefore the final transfer value will depend on the value of the underlying funds when they are transferred.
What if my 3-month transfer deadline has passed?
In limited circumstances, your UK scheme may provide a subsequent Cash Equivalent Transfer Value (CETV) at no charge. However, more often, your scheme may charge an additional fee (sometimes at an hourly rate) to recalculate the transfer value which will almost certainly be different to the original value quoted.
Some UK schemes may not permit the transfer to proceed until 12 months after the transfer was originally requested – effectively delaying the transfer for a year.
For these reasons, if you have received transfer value from your UK scheme, we recommend speaking with one of our specialists as soon as possible.
Are there any restrictions on where I can transfer my funds?
In order to protect members, UK Pension Transfers can only be made to an approved scheme. Approval for schemes is made by HMRC and receiving schemes need to prove they meet certain requirements. Once this has been done schemes are given Recognised Overseas Pension Scheme (ROPS) status. Currently, due to Australian Superannuation rules there are a very limited number of ROPS schemes available to transfer your funds to.
How is UK pension income from UK treated in Australia?
Any income you receive from the UK in retirement would be subjected to continuously fluctuating exchange rates. If you draw the pension and lump sum from the UK it will be added to your earned income and taxed at your highest marginal rate. This income will also be included in the test that determines how much Age Pension you receive from CentreLink.
In the event of my death what happens to my UK fund?
If you were to pass whilst your benefits remain in the UK, the amount payable to a spouse or dependent would depend on the rules of the scheme. In general, a scheme would pay a spouses pension equivalent to 50% of your original benefit. In addition, a refund of the contributions you made to the scheme would be payable if you passed away before retirement. Some more generous schemes allow the spouses pension to be payable to dependent children but it would generally cease to be payable after they reach the age of 21.
UK defined contribution schemes would generally pay the value of your underlying investments to your nominated dependants.
What happens if I were to pass away and my money is invested in an Australian superannuation?
The entire investment fund can be paid either as a lump sum or income to your dependants. Death benefit lump sum or pension payments to a spouse or dependent child are tax free. However, once a child is no longer deemed a dependant then there may be some tax payable on the benefits they receive from the super fund.
Is there a limit on how much can be transferred to a superannuation fund?
Yes, part of your transfer from the UK is deemed to be a contribution and part is classed as applicable fund earnings (AFE). The level of AFE applicable to your transfer value and the contribution caps you have available will determine how much can be transferred in a single financial year. For larger transfers, it is often necessary to stage the transfer of your funds over multiple financial years.
Once my UK Pension has been transferred to a QROPS fund must it remain there?
Yes, UK regulation requires that your funds are held in QROPS fund for a number of years, depending on your situation. During this time if you were to transfer your funds to a non-QROPS superannuation fund your balance would be potentially subject to a 55% tax charge.
How long can a pension transfer take?
Transfers do take time and whilst Sterling PTS will act diligently to complete any transfer request, we can’t guarantee any timescale for the completion of your transfer due to being reliant on a number of third parties. However, our current experience suggests that a transfer may be finalised within 6 months from the completion of the initial paperwork.