Welcome to Finance and Fury, the Say What Wednesday Edition

Today we have a question from Luke.

Hi Louis, I listen to you often. Very informative and interesting episodes.

My question is regarding super/pensions. I lived and worked in the U.K. for about 10 years – and still have a pension there. I also have Super here in Australia.

I heard I could bring my U.K. pension back to Australia, then I heard they stopped it, and then I heard I still could. I was hoping you could clarify this for me.

Great question! This was a big change to expats retirement planning a couple of years ago that seemed to go pretty unnoticed, so thanks for bringing the topic up.

Created issues

The issue with the UK Pension transfers to Australia occurred with changes to UK legislation back in 2015.

This was due to the UK pensions prohibiting people from transferring their pension funds before they have reached the minimum UK pension age of 55, due to changes in accessibility laws between the two countries (i.e. the UK didn’t want people transferring their Pension accounts to Australia and being able to access the funds at an earlier date). 

Anyone who has worked in the UK will normally have built up some form of UK pension benefits. It is now compulsory by law for all employers in the UK to enroll their employees into a workplace pension scheme.

This means when people leave the UK, they will need to decide what to do with the pension fund they have built up.

You can transfer your UK pension to an Australian Superannuation as long as the Superannuation has QROPS status. 

A qualifying recognised overseas pension scheme or QROPS for short, is an overseas pension scheme that the UK recognises as eligible to receive transfers from registered pension schemes in the UK.

To qualify as a QROPS the scheme must meet the requirements set by UK tax law. To check if a pension is a QROPS you can check the list of schemes that have told HM Revenue and Customs (HMRC) that they meet the conditions to be a recognised overseas pension scheme (ROPS).

From 2015 only people who are over 55 and either have an SMSF, or have a complying APRA super fund (i.e. regular super funds like an industry or for profit fund) are eligible.

Anyone who meets these requirements is eligible to transfers their UK pension funds through following the non-concessional contribution rules.  

These are separate rules to UK pension transfers –

These are as follows:

  1. The transfer amount has to be within the non-concessional contribution cap of $100,000 per annum.  A bring forward rule applies to members under age 65, allowing an amount of $300,000 in one lump sum through using the contribution limit over a three-year period. However, for anyone aged over 65 but under 75, they need to meet a work test too contribute funds to super, along with being limited to $100,000 p.a. as the bring forward rule is no longer available after 65. Upon turning 75, no further contributions can be made.
  2. A lifetime contribution limit of $1.6 million will also apply. If your total super balance is over $1.6 million, you won’t be able to make any further non-concessional contributions.
    1. Introduced with a different round of super reforms
    2. Part of balance transfer caps – $1.6m in Pension environment – cap amount in super
      1. Was going to be a lifetime cap of $500k retrospectively.

The Non-Concessional

If the transfer is made within 6 months of moving to Australia, then the whole transfer is treated as a non-concessional contribution and therefore subject to the NCC limits and rules.

If the transfer is made after 6 months of moving to Australia, then the rules are slightly different. The value of your UK pension on the date you arrived in Australia is treated as a non-concessional contribution. The growth in the value of your fund between the date you arrived in Australia and the date your transfer is treated as fund earnings and therefore subject to tax in Australia. This part of the transfer is neither treated as a concessional contribution or NCC.

There is only one retail superannuation with QROPS status, the Australian Expatriate Superannuation Fund, the rest are all self-managed superannuation funds (SMSF).

Once you transfer your pension to a QROPS in Australia then it becomes subject to normal Superannuation rules, as well as being subject to UK rules for 10 years after the transfer.

Few practical examples of how this works and explain the process of transfer further

You are 45 – No go

You are 55 and super of $1.7m – no go

You are 60, super of $900k and UK pension work $280k – Okay to transfer (if super fund complies)

You are 67, not working – No go, cant transfer into super here

Side note – lots of other pension funds (like RSA) can be transferred into super in Aus, but they do have their own laws and tax treatments with withdrawn early – just make you aware

 

Thanks for listening, if you want to get in contact you can do so here

 

Investing around geopolitical risks

Welcome to Finance and Fury. In this episode we will be looking at geopolitical risks and equity portfolios. Geopolitical risks are nothing new – these are always going on and equity markets are always looking at geopolitical risks – and how it will impact the price...

Michael Matusik; Where houses and units are sitting and in which direction their prices are likely to move

Episode 37 Michael Matusik; Where houses and units are sitting and in which direction their prices are likely to move In today’s episode, Jayden interviews Michael Matusik, an independent housing market analyst. Michael aims to be a voice of reason amongst the...

How to capitalise on the depressed global market and what investment strategies might be worth considering, if any?

Welcome to Finance and Fury, the Say What Wednesday edition. Question from John: “I have a question on how to capitalise on the depressed global market ie what investment strategies might be worth considering if any. I know it’s very much early days, but I’d be...

What is momentum investing and can this be the best investment strategy in a world where fundamentals mean little?

Welcome to Finance and Fury. This episode is about what is momentum investing and can this be the best investment strategy in a world where fundamentals mean nothing?   Over the past few years – value managers – or those that try to estimate the fair value of a...

Would a one world currency actually work?

Welcome to Finance and Fury, the Furious Friday edition.  In this episode we will look at the concept of a one world currency and if one single currency could actually work for the world? There has been an increased level of discussion around this topic over the past...

Should I invest in large, mid or small cap shares?

Welcome to Finance and Fury. Where to invest within the share market? Large, mid or small cap? What is best? The answer to this is highly dependant on what types of returns you need – and your timeframes The content of this episode is general information only – Not...

Why I finally bought another property and is this a good financial decision?

Welcome to Finance and Fury. This episode is about a bit of personal story “Why I finally bought another property and if is this a good financial decision?” So – if the episode title didn’t give this away - I have recently bought a property – well - technically not...

Is your money safe in the banks?

 Welcome to Finance and Fury, the Say What Wednesday edition. This week, two questions – both from John’s about banking system security  -   First John: I know you’ve spoken about this before, but would be interested to hear about if you think there could be liquidity...

How do I invest in property in 2019?

Hi Guys, and Welcome to Finance and Fury. Today I have Jayden with me for part 2 in the Mini-Series on the best investments for 2019 Last Monday we went through Shares, and whether it is a good idea to invest in 2019. Today we will look at investing in property in...

Will a Russian debt default cause a global financial collapse?

Welcome to Finance and Fury. Will a Russian debt default cause a global financial collapse? There are some major concerns amongst financial pundits at the moment in relation to debt defaults from the Russian gov – But is Russia defaulting on their debts something new?...

Pin It on Pinterest

Share This