Don’t leave your UK pension behind if returning to Australia

Don’t leave your UK pension behind if returning to Australia

Are you moving back to Australia, have a UK pension and you’re not quite sure what to do with it?


DECIDING on what to do with your accumulated UK pension or superannuation money when transferring between countries can be a headache. In fact it could be the last thing you want to think about as you make plans to move back to Australia.

There are potentially significant benefits from transferring however, and some of these are time-sensitive, so it’s important to get it right — at least if you want to retire richer and keep more in your pocket and not pay unnecessary tax.

The first thing to realise is you can’t cash out your UK pension (unfortunately) when you move!

There are many types of employer pension plans around, and some can be transferred directly overseas and some may need a 2 or 3 -step strategy before moving them offshore. For example National Insurance contributions (the State Second Pension) cannot be transferred home — but you may get access to this pension by first transferring it to a separate, personal pension plan in the UK.

How do you know if a transfer will benefit you?

It’s not straightforward estimating how your fund might perform in future in different countries, and you should be wary of advisers promising superior performance. However there are some potentially significant tax benefits to consider — which can help you move your retirement savings ahead much faster. More on those benefits shortly.

How does it work?

Non-UK residents have the ability to move UK pensions offshore (outside UK) to an international pension fund. The receiving fund needs to meet certain conditions provided by the HMRC. You will know if they do, since they are generally given official “Qualifying-Registered-Overseas-Pension-Scheme (or QROPS) status”.

So if you are getting advice about where to put the money transferred back to Australia, this is a good question to ask, “Is the fund QROPS compliant?”

The pension scheme must have similar characteristics to UK pension funds, that is, lump sum payments or income payments from the fund cannot be made until you are “of retirement age” similar to UK laws, and the pension regulations in the destination country (for the purposes of this article, Australia) must be acceptable to the UK government. Fortunately, Australia does have appropriate superannuation regulations, and there are many QROPS funds there. Alternatively you may be able to create your own self-managed superannuation fund in Australia, and thereafter have greater management and control over how and where to invest your retirement savings. Either way you have the potential to transfer into a structure with a broader choice of investments, or leave the funds in cash if you like, and even keep it initially in GBP currency.

You can then of course start making new contributions in Australia (possibly from your new employer) to your new Australian fund.

It’s critical to realise that the tax paid by the fund is different depending on when you make the funds transfer, that is, how long after you return and become resident again. Generally speaking transfers within 6 months are the most tax effective, (ensuring your retirement money is not eaten up un-necessarily by taxes) so pension transfers are very much time-sensitive, as well.

Now let’s have a brief look at some of the potential benefits for transferring pensions, for the departing UK resident.

Freedom from UK inheritance tax on the pension amount is possibly the greatest benefit. This benefit alone could save your family 55% in taxes upon your death – otherwise payable if you are not in a Registered QROPS offshore fund.

In addition, UK taxes are no longer payable when contributions are made to the fund that has transferred overseas to a qualifying fund.

Another benefit is the ability to withdraw funds in a more flexible way, when it comes to winding down, between the ages of 55 and 75, and even outside these ages. Income and capital payments can be made from the fund when in retirement, without needing to deduct any UK taxes which would otherwise apply if your pension remained in the UK. Funds withdrawn from an Australian superannuation fund at present are not taxed at all when withdrawn from the fund after age 60.

As mentioned above moving pensions to Australia can also open up opportunities to move into a more flexible structure with a broader choice of investments for your retirement savings.

Before taking advantage of all the benefits, there are some conditions you need to meet personally, and chief among them is that you need to plan to remain outside the UK for a period of at least 5 years.

Not everyone will benefit from transferring their pension fund overseas however, so getting good advice is critical. This will involve an adviser comparing not only what’s legally possible, but what’s in your best interest in the long term — when it comes to planning for retirement.

More information about QROPS is provided here by the HMRC


Daniel and his company My Financial Life are Authorised Representatives (AFS number 306941 and 387510) of Patron Financial Services Limited, AFSL 307379.

The information above is not general or specific financial advice. It is general in nature and does not take into account your specific goals or objectives. Information should not be relied upon without first seeking advice that is tailored and relevant to your own circumstances

Daniel Shillito

Daniel Shillito

Financial Adviser, Mortgage Broker, CPA and Expat specialist at Aussie Finance and Property, and My Financial Life Pty Ltd. Daniel works across borders providing advice and implementation of financial plans that can help in either one specific area, or take a holistic view of your financial life goals and plans. Daniel and his company My Financial Life are Authorised Representatives (AFS number 306941 and 387510) of Patron Financial Services Limited, AFSL 307379