How do I transfer my UK pension to Australia?

Relocating from the UK to Australia presents an exciting new chapter full of opportunities. However, it also brings a set of financial considerations, especially regarding retirement planning and pension transfers.

This is something I know only too well from my own experiences. While building your retirement assets where you intend to retire is always best, it’s impossible if you don’t know where that will be. A UK expat myself, I have lived in many countries and moved from Singapore to Australia in 2016. As a family of five with young children, we moved to Australia for the long haul, so it’s a situation I understand on a personal level.

For British expats moving to Australia, understanding when and how to efficiently manage their UK pension assets upon moving to Australia is critical. This article is designed to answer some commonly asked questions about transferring UK pensions to Australia.

When can I transfer my UK pension to Australia?

Under HM Revenue and Customs (HMRC) requirements, you can only transfer your pension to Australia when you reach 55. However, it’s important to note that you should start thinking about it much earlier. In fact, as soon as you know you intend to live in Australia for the foreseeable future, it should become an important consideration.

It’s about more than just the amount in your pension fund and the transfer itself. It’s about your retirement and life goals more broadly. Building an integrated financial plan that includes your pension pot in the UK and a potential transfer to Australia is an essential step to living your best life today and tomorrow.

Do I have to transfer my UK pension to Australia?

No. Consolidating retirement savings into one account will likely make it easier to manage funds and plan for retirement, but it’s not the only option. And it may not be the best one for you.

Like any financial move, it’s important to work with an experienced adviser who understands both jurisdictions and will get to know your personal circumstances and goals. Working with an adviser can help you understand whether the transfer makes sense for you. Speaking to an experienced expat adviser as early as possible will help you to make the best possible decisions, not just on your pension, but any UK assets you hold and your finances in general.

Can I transfer my UK pension to my Australian super fund?

For the transfer to take place, your Australian superannuation fund must be deemed by the HMRC to be a qualifying recognised overseas pension scheme (QROPS).

At the time of writing, only one Australian retail fund is listed as a QROPS, so most superannuation funds cannot accept your funds.

One option is to consider a self-managed super fund (SMSF). While these can have more complexities than a retail fund, it can be a great option, depending on your circumstances and goals. Today, technology coupled with expert advice takes away many of the cost and responsibility concerns.

What are the tax implications of transferring my UK pension to Australia?

While there are no tax implications on the UK side, you will have Australian tax obligations, and these can be complex.

Your tax obligations will align with the Australian tax laws pertaining to superannuation contributions, and it’s important to understand whether the amount you intend to transfer will breach your non-concessional superannuation cap.

It’s also important to note that there is Australian tax applicable to your fund earnings. Unless you make the transfer within six months of becoming an Australian resident for tax purposes and/or ceasing foreign employment, the earnings on your pension since the day you moved to Australia will be subject to taxation.

You have the option of paying tax at your personal marginal tax rate or, if your fund is closed (emptied) because of the transfer, you can elect to pay the earnings tax at the concessional super tax rate of 15%.

Typically, the former is only a good option where you have no taxable income in the year you transfer. This tends to be a small subset of people, but whichever tax rate you opt for, you will need to calculate your earnings figure, and this can be complex. It’s another area where the guidance of professionals is critical to make the right moves.

Are there strategies to minimise tax obligations when transferring my UK pension to Australia?

There are strategies you can employ to minimise your tax obligations, particularly if you have a spouse or partner who is an Australian citizen. However, it’s critical to build a personalised strategy that is focused on meeting your financial, life and retirement goals, not simply minimising tax alone.

Will currency exchange rates impact my UK pension transfer? 

If you transfer your pension into Australian dollars, currency markets will play a role. You also have the option to retain your fund in pounds sterling. But again, this is a decision that needs careful planning. For example, if you choose pounds sterling, you may be limited in the investments your fund can make, and if you are living in Australia, it may be best to keep your assets in the currency you are dealing with every day. But there are exceptions, and having flexibility of currency is a must.

What is involved in transferring a UK pension to Australia?

Making the transfer is, as you might appreciate, a paperwork-heavy process. It can be time-consuming and complex. An adviser can help you navigate this with a tried-and-tested process. Where possible, we can complete administrative paperwork for you. While there will be times you need to make a call or send an email as the fund only wants to deal with the pension member, we will guide you in exactly what you need to do.

How long does it take to transfer my UK pension to Australia?

It depends on the complexity of your pension and your circumstances. A straightforward transfer can take 3–6 months. Those with more complexity can take 6–12 months, so it’s best to talk to an adviser early.

What do I need to consider when transferring a UK defined benefit scheme pension to Australia?

There are additional considerations if your UK pension is a defined benefit scheme (DBS). A DBS pension is one where the amount you’re paid in retirement is based on how many years you’ve worked for your employer and the salary you’ve earned. It provides a guaranteed income in retirement, unlike defined contribution schemes, where your retirement income depends on how much has been contributed and how well the investments have performed.

The transfer will essentially be ‘cashing out’ your pension. To begin the transfer, you must request a cash equivalent transfer valuation (CETV) from your DBS pension provider. This figure is the lump sum amount your pension will be valued at if transferred from the DBS.

If you don’t like the figure on offer, you don’t have to make the transfer at that time. The value is tied to bond yields, etc., and can fluctuate, so you may choose to wait. However, trying to time the market is tricky. So, it’s equally important to consider whether the amount on offer will allow you to meet your retirement goals. An adviser can assist in this process.

Note, most DBS pension trustees only allow one CETV per year without charge. You should consider this when making a request. It may be sensible to talk to your adviser first.

What steps can I take immediately?

The best first step is to talk to your adviser as soon as possible to start working out your broader retirement plan, not just your UK pension transfer. That way, you will have a roadmap that considers your lifestyle and goals – and ensures you live your dream retirement.

If you’re looking for advice on transferring your UK pension to Australia or your finances as a UK expat more broadly, book a time for a free chat and find out how we can help. It may only take 20 minutes of your time today to save you considerable time, money and frustration down the line.