UK PENSION TRANSFERS INFORMATION
As part of a holistic financial planning organisation, PTS Sterling specialise in transferring UK pensions to Australia and have established a strong reputation for seamless UK pension transfers to ROPS superannuation funds.
As part of your retirement planning strategy a UK pension often forms a significant component of your retirement plans, particularly with the current record high transfer values being offered by defined benefit pension schemes due to low interest rates.
Transferring UK pension benefits to Australia is complicated and comes with some significant benefits and risks. It is important that you seek specialist advice to ensure a pension transfer is suitable for you.
PTS Sterling provide an integrated solution that comprises of specialist UK FCA authorised advisers to enable the transfer of UK defined benefit pension schemes as well as UK Self Invested Personal Pension (SIPP) providers that provide flexibility to transfer your pension and optimise tax efficiency whilst maintaining a suitable investment strategy for funds that may need to remain in the UK.
Sterling PTS Pty Ltd (ABN 50 641 285 538) and its Advisers are Authorised Representatives of Fortnum Private Wealth Ltd. Sterling PTS Pty Ltd’s Corporate Authorised Representative Number is 1284503.
AM I ELIGIBLE?
As a result of changes made by HMRC on 6 April 2015, only superannuation funds that specifically exclude members under the age of 55 currently meet the UK “Age Pension Test” and thus are able to be registered as a ROPS.
Due to this change a large number of existing Australian ROPS funds became ineligible to accept UK Pension Transfers. In addition, individuals under the age of 55 wishing to transfer their funds to Australia have to place their transfer value in a holding account, such as a UK SIPP.
Further changes from UK regulators also make it more difficult and complex to transfer from a UK Defined Benefit scheme. It is now a UK regulatory requirement for a defined benefit transfer of more than £30,000 that the member obtains advice from a UK Financial Conduct Authority (FCA) Accredited Adviser, before the trustee of the fund will allow the transfer to proceed.
As part of the sweeping changes, the UK also introduced a 25% tax charge on transfers made to schemes whereby the QROPS is based in one country and the individual is resident in another. Therefore, as an Australian resident you would be liable to a 25% charge if you were to transfer your funds to a scheme outside of Australia.
SHOULD I CONSIDER TRANSFERRING MY UK PENSION?
|Transfer Value (GBP):||SMSF Already in Place||SMSF Not Currently in Place|
|Less than £80,000||Not a cost-effective exercise||Not a cost-effective exercise|
|£80,000 – £100,000||Transferring may be an option for you||Not a cost-effective exercise|
|Greater than £100,000||Transferring may be an option for you||Transferring may be an option for you|
One of the key benefits of the Australian retirement system is that once you reach age 60 and stop working, you are able to draw an income from your pension that is exempt from tax. However, the Australian tax system considers any income or lump sums your receive from the UK to be taxable income, and therefore if you leave your pension funds in the UK, it is likely that you will be liable to pay income tax on the benefits you receive in retirement.
Consolidate Pensions and Superannuation
It is often difficult to keep on top of and manage a UK pension fund. Some funds may make obtaining updated information easy, but are you clear on how your fund is performing? Whether your investment strategy is appropriate? If your account is being eroded by excessive fees? By consolidating your UK retirement benefits with your Australian superannuation, you will have greater visibility and control over the management of your retirement funds. You will be able to implement consistent retirement strategies based on your plans, with only one set of rules to manage. You will be able to set and manage your own investment strategy and have transparency as to how your funds are performing.
Flexibility Throughout Retirement
If you are a member of a defined benefit pension scheme, the income you will receive in retirement is defined by the scheme rules which have specific income and capital restrictions. Generally, it is not possible to tailor your retirement income to your specific needs and plans. If you opt to transfer your benefits to Australia, you will enjoy greater freedom to choose how you take your benefits. Currently, you are only restricted to draw a minimum income from your pension when you retire, depending on your age. At present, a minimum income of 4% of your account balance would need to be taken if you retire and start drawing an income from age 60.
Foreign Exchange (FX) Management
Are you concerned about the current exchange rate and the impact of moving a large portion of your wealth to Australia? Sterling PTS provide you the choice to retain your transferred funds in Sterling (GBP) so you can wait and manage the conversion whilst your funds are held in your Australian ROPS fund. In addition, due to a unique arrangement we are able to access wholesale FX rates through our transfer process which Sterling PTS are able to pass to our clients. Our wholesale FX rates will provide a significant cost saving associated with the transfer of your funds, leaving more for you to invest.
Safeguard Against Changes in Legislation
There have been a number of significant changes to UK pension transfer legislation in recent years which has resulted in greater complexity and costs to individuals wanting to transfer. By transferring your funds now, you will safeguard yourself against future changes to UK or Australian legislation that may further increase costs or potentially prevent you from transferring in the future.
Estate Planning – Your Family Will Thank You!
Many defined benefit pension schemes provide limited benefits to your family in the event that you pass away. Typically, your spouse may receive 50% of your expected retirement income for the remainder of their life with no provision for your children. This income would also be subject to exchange rate movements and tax. By holding your funds in an Australian ROPS account, you can take comfort in the knowledge that the entire benefit (transfer value) will be available to your spouse and children immediately if one or both of you pass away.
A Qualifying Recognised Overseas Pension Scheme (QROPS) is a superannuation fund that is recognised by HM Revenue & Customs (HMRC) as being eligible to receive a UK pension fund. The rules relating to QROPS funds were established in 2006 and designed to ensure UK pension funds transferred offshore continue to be held in an equivalent retirement vehicle to a UK pension.
You must transfer your UK pension into a QROPS as pensions transferred into a non-qualifying fund will be deemed an ‘unauthorised payment’ and taxed at 40%. An additional surcharge of 15% may also apply in some circumstances.
On 6 April 2017, HMRC made some significant changes that impacted many Australian QROPS funds and resulted in the removal of most superannuation funds that can accept UK pension transfers. To be registered as a ROPS a fund, HMRC has implemented a Pension Age Test which prevents members under age 55 from being able to establish a QROPS fund. In addition, a QROPS fund will also need to meet certain regulatory requirements and tax recognition tests. To this end, there are currently limited superannuation options available in Australia to receive your UK pension transfer.
If you are under the age of 55 and have received a transfer value from your UK scheme and you would like to understand your options, please contact us. Whilst you may not be able to establish a QROPS fund in Australia to receive your UK fund, it is possible to hold your fund in a UK Self Invested Personal Pension (SIPP) until you meet the requirements to transfer your funds to Australia.