FAQs

Eligibility: Is my pension eligible to be transferred?
Pension Responsibility: Who is responsible for my pension throughout the process?
Taxation: What are the tax implications of transferring my pension?
Timing: How long does the process take and how quickly do I need to start?
Transfer Limits: Is there a limit to how much I can transfer?
Death Benefits: What happens to my pension upon my death?
Outsourcing Pension Transfers: I am a Financial Advisor but transferring pensions is not my area of expertise – can I outsource the process to your company, Pension-Transfers?

Visit our Glossary for explanations of some of the words and terminology associated with transferring pensions from the UK to Australia.

Eligibility

The majority of pension funds in the UK can be transferred to Australian QROPS superannuation funds. This includes Government Service Pensions, Private Pensions, Personal Pensions, Stakeholder Pensions and Occupational Pensions. NB: British State pensions are not able to be transferred to Australia. Your pension in the UK must be preserved, i.e. you have not yet started to receive any pension payments. If you have start receiving payments from your pension fund in the UK, you cannot transfer it to Australia. Other rules include:

Permanent departure from the UK with no intention of returning to work or retire
Australian residency for tax purposes
Employment in Australia (must satisfy the usual contribution rules).

Pension Responsibility

At all times during the transfer process the pension fund is in your name, either directly under the UK pension provider or the Australian pension provider, or by the trustees of each.

Taxation

Tax on Transfers

Generally there is no tax payable on pension lump sum transfers if:

the pension transfer is completed within 6 months of the individual becoming an Australian Resident
the pension is transferred into a ‘Qualifying Recognised Overseas Pension Scheme’ (QROPS)
the transfer value is under the non-concessional caps imposed by Australian superannuation law

Transferring a pension can take 3-4 months causing the transfer to be completed after the 6 month window. In this case, consistent with the Australian Foreign Investment Fund (FIF) rules, tax will be payable on any increase in the fund from the day you became an Australian resident to the day the fund was transferred. E.g. you became a resident of Australia on the 1st of July 2004 and at that time the transfer value of your UK Pension was $50,000. The fund was transferred on the 10th of January 2005 (over 6 months) and the transfer value was $54,000. You will be taxed on the $4,000 increase. This growth will either be taxed at your marginal tax rate, or at the concessional rate of 15% ($600 in this case). Depending on your personal tax circumstances, either option could be suitable. To qualify for the 15% concessional tax rate the following conditions must be met

you must elect (which we’ll do for you) to have the tax liability paid by the Australian Superannuation Fund
your transfer value must represent your entire benefits from your UK pension fund
your pension must be transferred directly into the receiving QROPS

If the fund is not transferred into a QROPS, ‘Her Majesty’s Revenue and Customs’ (HMRC) will apply a 40% tax on the transfer value and you will also be personally required to pay an additional 15% if the transfer value is greater than 25% of all your UK Pension benefits.

5 Year Non-UK Residency Rule

Withdrawals from a QROPS before being non-resident of the UK for 5 complete tax years will be classed as an unauthorised payment. Unauthorised payments attract a 40% tax charge in the UK and if your unauthorised payment is over 25% of the balance there is an additional 15% surcharge. In this circumstance you are required to complete a UK self-assessment return by 31 January after the end of the UK tax year in which the unauthorised payment is made. Within those 5 years, if you have lived in the UK for 183 days or more in one tax year, or 90 days averaged over 4 years, HMRC will have deemed you to be a UK tax resident for that period.

Tax at Retirement

If you leave your pension in the UK ...

In the UK pension environment contributions to your pension fund are generally tax free. When you retire and start receiving pension payments (via an annuity), you are taxed at your UK marginal tax rate. If you are an Austalian tax resident at retirement you will be taxed at your Australian marginal tax rate. In the event of death, any benefits paid to either your spouse or a dependant will be taxed at their Australian marginal tax rate.

If you Transfer your Pension from the UK to Australia ...

You can withdraw your Australian superannuation tax free when you reach the age of 60. This includes any UK pension monies transferred into your Australian superannuation scheme. If a condition of release is met, you may be able to access tax free superannuation monies before you reach the age of 60.

Timing

This can depend on your pension fund provider in the UK, but we expect the transfer to take between 3-4 months from the date we receive your Letter of Authority. Some pension funds, especially smaller ones, are unfamiliar with the process as the change in pension transfer regulations only came into force in 2006. Funds such as these may take longer to process.

Transfer Limits

Pension Fund transfers to a QROPS scheme in Australia are treated as Non-Concessional Contributions under superannuation law in Australia. Under this law, you are entitled to transfer 6 times the Concessional Contribution cap EACH YEAR into your superannuation fund without incurring any penalty tax. For the 2009/10 year this Concessional Contribution cap is $25,000 (under 65 years of age) therefore the Non-Concessional cap is per year is $150,000. Get the latest Non-Concessional rates. If you are under 65 on the 1st of July, then you are able to ‘bring forward’ 2 years worth of Non-Concessional Contributions which effectively means you can transfer $450,000 without incurring the penalty tax, however this means you cannot subsequently transfer in those 2 years you brought forward. If you transfer over these limits, then 46.5% tax is liable and must be paid from superannuation monies. To release these monies a release authority must be provided to the applicable superannuation fund, where they will have 30 days in which to release the funds. If you between the ages of 65 and 74 you are able to contribute up to $150,000 annually if you meet the work test. If you are 75 years or above you are not eligible to make Non-Concessional Contributions.

Death Benefits

Upon death, the treatment of your superannuation benefits in the hands of beneficiaries depends on whether the beneficiary is a Dependant or a Non-Dependant. Below is a brief summary:

Pensions

Paid to a Dependant - depends on the age of the Primary Beneficiary and the Dependant. If the Primary Beneficiary was over the age of 60 at death, then the Dependant is not liable to pay tax if they receive a pension. If the Primary Beneficiary was under the age of 60 at death then it depends on the age of the Dependant. If over 60, then no tax is liable, if under 60 then tax will be liable at the Dependant's marginal tax rate.
Paid to a Non-Dependant - the pension must be paid out as a lump sum and a 15% tax applies to the receiving Non-Dependant.

Lump Sum

Paid to a Dependant - tax free.
Paid to a Non-Dependant - the taxable component of the deceased's superannuation fund are taxed at 15%, the non-taxable component is tax free.

Outsourcing Pension Transfers

Financial Advisors, have you experienced difficulties in transferring a client's pension fund from the UK to Australia? Then why not outsource the process to us? Pension-Transfers can remove the hassle - we process the transfer, you keep the client. What could be more simple! Contact us now to see how easy it is.