To transfer your UK pension to Australia you need to have your existing UK pension information ready, along with a few other items I have outlined in my checklist below.
Anyone over the age of 55 and with a minimum of £20,000 in pension funds can transfer their UK pension to an Australian qualifying recognised overseas pension (QROPS).
Transferring a UK pension checklist
- Collate existing UK pensions
- Request a CETV (Cash Equivalent Transfer Value)
- Conduct a cost and performance comparison
- Identify the best solution in Australia
- Submit transfer request documentation to existing and new provider
What is a UK pension and how do you know if you have one?
First and foremost, it’s crucial to understand whether you have a UK pension before you can think about transferring one to Australia.
A UK pension fund usually takes the form of either a workplace pension scheme, a personal pension, or a self-invested personal pension (SIPP). You may also have a small self-administered scheme (SSAS) if you are a company director or senior executive.
Below are details of the different kinds of UK pensions that you may have. Remember: it may be best to check with your employer or financial advisor for details about your UK pension funds if you’re unsure. You can also use the Pension Tracing Service to find lost pensions.
If you were ever employed in the UK, you may well have a workplace pension scheme. In fact, since 2012, it has been compulsory for employers to auto-enrol employees into a pension scheme.
Your workplace pension may be either a defined benefit (or “final salary”) or defined contribution scheme, depending on who you worked for and when.
You’ll receive tax relief on contributions at your marginal rate of Income Tax, and your money will then be invested by the scheme provider.
A personal pension scheme is one you’ll have opened yourself separately from your workplace. These will typically be defined contribution schemes.
As with a workplace pension, you’ll receive tax relief on your contributions and your money will be invested by the pension provider.
Self-invested personal pension (SIPP)
A SIPP is a type of defined contribution scheme pension. As with other schemes, you’ll receive tax relief on your contributions. But crucially, you will be responsible for the investment decisions made with your retirement savings.
Often, transferring all your existing pensions into a SIPP ahead of transferring to Australia can be a sensible way to start the process. This is for two key reasons:
- All your pension funds will be in one place
- You’ll be able to access Australian investments, which your current pension provider may not invest in. This could make transferring your pot easier down the line.
Small self-adminstered scheme (SSAS)
An SSAS is typically set up by senior executives or company directors of a business, usually for no more than 11 people. They receive the same tax relief as other pensions, and investment decisions are the responsibility of the trustees.
They are typically flexible, allowing access to a wide range of different investment options.
Moving your pension to an Australian superannuation fund
Once you’ve established the types of pensions you have and the savings within them, you can start thinking about transferring these to Australia.
Often, the most practical way to do this is to transfer them to what’s known as an “Australian superannuation fund”, also sometimes called “Australian super funds”.
‘Supers’ as they’re commonly known as, are a type of pension fund that all Australian employers must contribute to for each of their employers.
An Australian super fund is essentially the closest equivalent the country has to a UK pension scheme, allowing you to create a tax-efficient savings pot for retirement.
In general, there are two types of Australian superannuation funds you can choose from:
- Self-managed super funds. A self-managed super fund (SMSF) is comparable to a SIPP, allowing you to save for retirement. You are responsible for the management, administration, and investment decisions in an SMSF. You can also outsource this to a financial expert to do on your behalf, although you will likely have to pay for this.
- Retail superannuation funds. Sometimes referred to as “industry super funds”, a retail fund is also a retirement account. In this type of fund, the provider will invest your money on your behalf. UK citizens may find it difficult to transfer pension savings to a retail fund – find out more below.
Can my super fund receive a UK pension transfer?
If you want to transfer your UK fund to an Australia super fund, you’ll need to find a firm currently accepting UK pension transfers.
One important point to note is that you won’t be able to transfer your pot to a super pension fund before the age of 55. This is because this is currently the UK’s normal minimum pension age (NMPA), before which you typically cannot access your pension savings.
As a result, this is the minimum age you must be before you can transfer a pension to Australia. The NMPA is also set to rise to 57 in 2028.
If you’re before this age, it may be worth transferring existing pensions to a SIPP now. It may be easier to manage a single retirement fund like this, especially if you are already an Australian resident. Additionally, this can remove some of the complexity of transferring when you come to move your pot.
At the other end of the spectrum, you must also be below age 75 to transfer to a super pension fund.
When searching for a firm that will receive UK pension transfers, you should also make sure that this is a “QROPS” – find out more below.
Qualifying recognised overseas pension schemes
When moving a UK pension overseas to an Australian super pension fund, you will typically need to do so through a qualifying recognised overseas pension scheme, or “QROPS”
A QROPS – standing for “qualifying recognised overseas pension scheme” – is an overseas pension scheme that meets certain requirements set out by His Majesty’s Revenue and Customs (HMRC) in the UK.
This moves your pension money into Australian financial jurisdiction, and involves turning it into Australian dollars (AUD) rather than Great British pounds (GBP).
Can expats legally transfer a UK pension scheme to a QROPS in Australia?
Yes, it’s legal for expats to transfer a UK pension scheme to a QROPS in Australia. In fact, this is likely going to be the most sensible way to transfer your pension.
That’s because not using a scheme recognised by HMRC could see a tax charge of up to 55% applied to your transfer.
It’s important to note that, as of January 2023, most QROPS are self-managed super funds, with just one retail super fund available: the Australian Expatriate Superannuation Fund.
You can check whether a scheme you are considering is a QROPS by going to the HMRC website and searching by name.
Transferring to a QROPS can be a highly complex process, so please speak to me before you transfer to make sure you’re complying with the necessary rules and requirements.
What are the tax implications of transferring a UK pension?
There are various tax implications of moving a UK pension across to Australia.
UK tax on transfers
You may have to pay a UK tax bill when you transfer your UK pension. For example, you might face:
- A 25% tax charge when you transfer to a QROPS if you are not a resident in Australia. This is called the “overseas transfer charge”.
- Up to 55% tax if you transfer to a scheme that is not a QROPS under HMRC legislation.
Australian tax on transfers
You may also face Australian tax on your transfer. You will be taxed on the investment growth from between the date you became an Australian resident and the date you transferred your pension. This will be generally tax-free if you transfer your pension within six months of becoming a resident.
Additionally, as a UK pension transfer is considered to be a “non-concessional contribution” by the Australian Tax Office (ATO), you may face a tax charge if your funds exceed your non-concessional contribution allowance.
As of January 2023, this stands at $110,000 AUD each financial year. If you are under 75, you can carry forward two years of allowance, giving you a potential total allowance of $330,000 AUD.
However, any excess above this amount could be subject to tax.
Tax on withdrawals
Finally, there are also tax considerations for when you come to draw your pension funds. UK pensions are seen as highly tax-efficient, as you will typically receive tax relief when you make contributions.
When you draw pension income in the UK, the first 25% of your pot is tax-free, and you then pay Income Tax on drawing the remainder. This charge will be at your marginal rate of Income Tax. Similarly, you’ll be taxed in Australia if you leave your savings in your UK pension and withdraw your pension savings while living there.
With Australian super funds, this occurs the other way around: you would pay tax on your contributions, and your withdrawals are then entirely tax-free. So, you don’t pay tax when you come to withdraw from a super fund once you turn age 60.
Of course, you’ll likely have received tax relief on at least a portion of your pension contributions while working in the UK. So, by moving your pension to an Australian super, you can benefit from tax-efficiency on both your contributions when made in the UK, and on your withdrawals in Australia.
This is a significant benefit of moving your UK pension to Australia, and is often one of the biggest reasons UK expats tend to do so.
Why transfer a UK Pension to Australia?
If you’re an expat from the UK and now living in Australia as an Australian resident, you need to consider whether you should transfer your UK pension.
Below are a few advantages of doing so.
Advantageous tax treatment
As you saw above, the fact that your withdrawals from a super fund will be generally tax-free means that you can benefit from tax-efficiency on both contributions and withdrawals.
Help you avoid currency risk
Currency fluctuations between GBP and AUD could reduce the value of what you withdraw if you leave your savings in your pension. This is known as “currency risk”.
Your retirement savings are finite and will need to support you for the rest of your life. But the value of GBP or AUD could swing over time, increasing or decreasing the value of your fund.
Meanwhile, by transferring to a super fund, your money will be held entirely in AUD, meaning you won’t be exposed to currency risk.
Consolidate your funds under a single arrangement
As well as avoiding currency risk, moving your pensions under a single arrangement can be useful in ensuring that your retirement funds are all held in one manageable pension plan.
What can go wrong when transferring a UK pension to Australia?
Of course, as with any financial decision, there are downsides to consider too.
Below are a few drawbacks of transferring to an overseas or Australian scheme, as well as reasons that it may not make sense for you to do so.
Your age might affect the transfer
You won’t be able to transfer you pension before the UK NMPA – currently 55 in 2022/23. So, if you want to retire to Australia before this point, you won’t be able to move or access your pension until you reach this age.
Meanwhile, if you’re 75 or older, an Australian super fund will not be able to accept member contributions.
You may not be able to move your pension
There are a few types of UK pension schemes that you are simply not able to move. This includes:
- Government-backed defined benefit pension schemes
- Company pensions in the Pension Protection Fund (PPF)
- A company scheme that you’re already drawing funds from
- Annuities if you’ve already purchased one with your pension savings
- The UK State Pension
Bear in mind that while you can’t transfer your UK State Pension, you can still receive it directly into your Australian bank account. However, the amount you receive won’t increase each year like it will for UK residents.
Your pot may not be worth moving
If your UK pension savings are less than £20,000, you may not be able to move them at all.
And indeed, if they exceed this threshold but not by a great deal, the charges, fees, and taxes you could face might mean it simply isn’t worth moving your funds.
You might like your current UK scheme and prefer not to move it
If you’re comfortable with your current pension provider and would prefer to stick with them, you can choose to do so and simply withdraw your funds from your pension while living in Australia.
Bear in mind that you might be exposed to currency fluctuations in doing so.
You might consider returning to the UK
If you think you may return to the UK at some point, you may want to consider leaving your pension where it is. Otherwise, you may face more tax and charges when you go to move your funds back to the UK.
Is transferring my pension to Australia a good idea?
The question of whether transferring your UK pension to Australia is a good idea or not doesn’t have a straightforward answer, as it will depend on your personal circumstances and financial situation.
There are certainly compelling reasons that you might want to do so. For example, the potential tax benefits and removal of currency risk may make moving your retirement savings to an Australian fund worthwhile for you.
However, a transfer won’t be appropriate in all circumstances and will depend on you as an individual.
When making decisions about this, it’s often sensible to take personal financial advice from an expert. Please do speak to me if you’d like personalised advice.
How much money can you transfer from a UK pension to Australia?
Your pension savings will need to be at least £20,000 for you to transfer them to an Australian QROPS.
Theoretically, there is no maximum amount you can transfer. That said, there is a Lifetime Allowance (LTA) for how much you can tax-efficiently save across all your UK pensions. In the 2022/23 tax year, this is £1,073,100.
If you’re under age 75 and try to transfer a UK pension that exceeds the LTA to a QROPS, you may see a 25% tax charge on the funds that exceed the threshold.
Additionally, as a UK pension transfer is a “non-concessional contribution”, you’ll face a tax charge if the value of your pot exceeds the non-concessional contribution allowance.
As of January 2023, this stands at $110,000 AUD. If you are under age 75, you can carry forward two years of allowance, meaning the total allowance you could have access to is $330,000 AUD. You may have to pay a tax charge on any excess above this.
Glossary of terms
Below are some of the key terms to look out for when transferring a UK pension to an Australian pension scheme.
Australian Expatriate Superannuation Fund (AESF)
A retail super fund offered by IVCM that British expats living in Australia can transfer their pension savings to.
As of January 2023, the AESF is the only retail super fund registered with HMRC as a QROPS.
Qualifying recognised overseas pension scheme (QROPS)
An overseas pension scheme recognised as legitimate by HMRC in the UK. You can search for a QROPS on the HMRC website.
Retail superannuation fund (RSF)
A form of Australian super fund in which funds are administered by a scheme provider on your behalf. Currently, as of January 2023, the only RSF that meets the QROPS requirements in the UK is the Australian Expatriate Superannuation Fund from IVCM.
Self-managed super fund (SMSF)
A self-managed Australian super fund, meaning that management and administration is your responsibility, including choosing investments. These are comparable to a UK SIPP.
Occupational pension scheme
A pension scheme offered by your employer. This could be either a defined contribution scheme, or a defined benefit scheme (often referred to as a “final salary scheme”).
If you want to transfer a defined benefit pension valued at £30,000 or more, UK law requires you to seek professional financial advice
You may not be able to transfer certain types of defined benefit workplace pensions to Australia.
How do I transfer my UK pension to Australia FAQs
How do I transfer my UK pension?
To transfer your UK pension to Australia, you first need to find a super fund to transfer to. This typically needs to be a QROPS as per HMRC rules.
You must have reached the normal minimum pension age (55 in 2022/23) to transfer your UK pension overseas.
Can I draw my UK State Pension in Australia?
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
Overseas pension transfers can be complex. Make sure you take financial advice before you transfer your funds.