Can I transfer my UK pension to Australia?

If your retirement dream is living a laid-back Aussie lifestyle, you’ll need to get up to speed with QROPS.

Learn about Australian superfunds, also known as superannuation funds, and the rules and regulations required to transfer your UK private or workplace pension fund to Australia securely.

Transferring to other countries: Canada | New Zealand | Malta | Spain | Portugal

Is it possible to transfer my pension to Australia?

If you’re planning to retire to Australia, it can make sense to transfer your UK pension(s) there.

This is possible provided that you’re transferring your UK personal pension funds to an Australian pension scheme which qualifies as a QROPS – a qualifying recognised overseas pension – and those pension funds are a minimum of £20,000.

However, you cannot move a UK pension to an Australian QROPS until you’re 55.

This is due to Australian superannuation schemes that allow people to have access to their pension, which is not permitted under QROPS rules.

What is a QROPS?

A qualifying recognised overseas pension scheme – QROPS – is an overseas pension scheme that HMRC recognises as eligible to receive transfers from registered pension schemes in the UK.

Introduced in 2006, QROPS is designed especially for UK residents living overseas who intend to remain outside the UK permanently.

If you transfer to an overseas pension which isn’t QROPS, then usually it’ll be classified as making an unauthorised payment from your pension, which could result in a tax charge of 55% with the possibility of additional penalties.

A transfer like this is also unlikely to be regulated and may leave you without any way to claim compensation.

What are all the rules for transferring a pension to Australia?

The following types of UK pension arrangements can be transferred to an Australian QROPS:

• An occupational pension scheme
• A defined benefit scheme
• A defined contribution scheme
• A Small Self-Administered Scheme (SSAS)

You’re not allowed to transfer:

• UK state pension
• Unfunded civil service pensions, which include teachers, fire fighters, NHS workers, police and armed forces

Since 9 March 2017, transfers to QROPS have attracted a 25% tax charge – but there are exceptions.

You’ll still be able to make a transfer tax free if one of the following applies:

• You’re resident in the country where the QROPS receiving your transfer is based
• The QROPS you’re transferring to is an occupational pension scheme and you’re an employee of a sponsoring employer under the scheme
• The QROPS you’re transferring to is an overseas public service scheme and you’re employed by an employer that participates in that scheme
• The QROPS you’re transferring to is a pension scheme of an international organisation and you’re employed by that organisation

If the scheme you’re transferring out of does not receive the correct paperwork then a charge of 25% on transfer is required and you’ll have to apply for a refund via your scheme at a later date.

As of 6 April 2024, the lifetime allowance (LTA) has been abolished and replaced by the overseas transfer allowance (OTA), currently set at £1,073,100.

If you’re under 75 and transfer out of UK registered pensions into a QROPS, the value of the transfer will be measured against the OTA. If it’s in excess of your allowance, this could result in a tax charge of 25% on the excess.

Additionally, certain payments, such as taxable pension income and lump sum death benefits paid after age 75, are not covered under the OTA assessment.

What are the benefits of transferring my pension to Australia?

A key benefit is having your retirement savings housed in your country of residence makes them easier to manage. You’ll also have a better idea of how much money you’ll get without fluctuating currency conversion rates.

Receiving income in two different countries and keeping track of any tax and regulation changes can be tricky.

For example, if you started withdrawing funds from your UK pension while living in Australia, you’d need to apply to HMRC for a double taxation agreement, or you could end up with a tax bill in both countries.

Other benefits to consider include:

• You can consolidate all of your UK pensions into one manageable pension plan.
• You’ll avoid any fees associated with accessing your UK pension overseas, including trail commission.
• General management fees for the pension you transfer into could be lower than those you pay in the UK.
• If the transfer occurs within six months of you becoming an Australian resident, then the transfer of funds could be tax-free.
• From the age of 60, when the foreign super transfer has been taxed at 15%, the income benefits are generally tax-free.
• You may flexibly draw your pension benefits during retirement.

Your UK pension funds will not be subject to UK income tax charges upon death.

What are the drawbacks to transferring my pension to Australia?

Only certain types of Australian superannuation funds are approved by HMRC as suitable for a UK pension transfer.

Australian superannuation funds, or ‘supers’, are pension funds to which all Australian employers must contribute to for each of their employees.

You can access your super retirement fund once you reach the age of 60 and have retired from work or when you’re 65 and a pensioner, even if you’re still employed.

To transfer your UK pension to an Australian superannuation fund, it must be on the QROPS list.

In addition:

• If you’re under 55, you cannot usually transfer your UK pension to Australia. Under exceptional circumstances where this might be possible, you’ll likely face high charges.
• If you don’t make the transfer within six months of moving to Australia, you could face additional taxes.
• Defined benefit pension schemes, often also known as final salary schemes, come with specific and often generous benefits, which may mean a transfer could see you losing out on some guaranteed benefits upon retirement.

Is transferring my pension to Australia really a good idea?

Are you definitely going to live out your retirement in Australia?

If there’s a chance that you might return to the UK, then transferring your UK pension to an Australian scheme might not be the right decision.

Retiring to Australia is a once-in-a-lifetime venture and undertaking such a big life change doesn’t come without risk.

However, an experienced financial adviser who has direct knowledge of the practicalities of transferring assets and navigating the tax and pensions landscape can provide you with all the information you need.

By getting advice, you’ll have peace of mind that you’re making the right decision for your immediate needs and your long-term financial future.

How do I transfer my pension to Australia?

If you’re considering transferring your UK pension to an Australian scheme, it’s essential to understand every rule relating to your existing pension, HMRC QROPS, and your new Australian superfund.

Otherwise, you could end up losing more money to charges and taxes than you expected, or your pension may end up in a scheme that’s not suitable for your future retirement needs.

These are the steps to follow:

1. Contact your pension provider to find out its rules on transferring your pension out of the scheme and into an overseas fund.
2. Consult the HMRC list to find a QROPS Australian superfund that accepts transfers from the type of UK pension you hold.
3. Ensure you’re aware of all the rules relating to the transfer, charges, fees, taxes, time scales, and financial limits.
4. If everything is in order, you sign the paperwork to allow the pension transfer to happen.

What about my state pension?

Receiving your state pension shouldn’t cause any difficulties if you retire to Australia.

You can either keep your UK account and have your state payments paid into it, or have it paid into an Australian bank account.

However, it’s important to understand that UK state pension payments are frozen when paid to retirees in Australia which means they would not receive annual increases.

What other things should I consider about my finances when moving to Australia?

It’s recommended to get expert advice on all aspects of your financial situation – from life cover and health insurance to minimising inheritance tax and setting out your will and power of attorney.

If you’re thinking of buying a property and you aren’t an expat Australian, you would be classed as a foreign investor, which is more restrictive and expensive for property ownership, so it’s a good idea to seek expert mortgage advice.

When it comes to the taxes you'll pay, this depends on your legal status. if you’re a permanent resident of Australia, you’re considered a full citizen and taxed as such.

However, you won’t be taxed on any non-pension income you make outside of Australia, such as investment capital growth or dividends, but you could pay capital gains tax on any Australian assets you acquire while living there.

Get expert financial advice

Deciding to transfer your UK pension to Australia is a significant step that involves understanding both the UK pension rules and the Australian superannuation system.

While moving your pension can offer benefits such as simplified management, being paid in the local currency, and potential tax savings, it’s vital to consider the specific rules governing Australian superannuation, especially around access age and tax treatment.

Balancing these benefits against the associated fees and potential charges can help ensure your savings work best for your plans to retire to Australia.

Unbiased can quickly match you with a financial adviser for expert financial advice on the complexities of transferring your UK pension to an Australian superannuation fund, ensuring you understand all the rules, tax implications, and options available for your retirement planning.

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