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

 

Say What Wednesday: The relationship between shares and property in Australia

Say What Wednesday The relationship between shares and property in Australia Welcome to Finance and Fury’s ‘Say What Wednesday’. Today’s question is from John. John asks, “What is the relationship (if any) between shares and property in Australia? Should we expect the...

Buying Property inside an SMSF: Tips and traps, what works and what doesn’t

Say What Wednesday Buying Property inside an SMSF: Tips and traps, what works and what doesn't Welcome to Finance and Fury, 'Say What Wednesdays' where each week we answer your questions. This week's question is from Sandeep: “Hi, Can you please talk about how to...

The political battleground around you being able to control where your superannuation is invested.

Welcome to Finance and Fury, The Furious Friday Edition Today, the episode is delving a little deeper into superannuation I Work as a financial adviser – see a lot of changes to the legislation of superannuation since I joined the industry in 2011 – Today - Episode on...

Furious Fridays: The Death of Stalin

Furious Fridays The Death of Stalin Last episode we ended with Lenin’s death. The roll out of Communism was well underway and it was time for new leadership. One his last policies before he died in 1924 was the New Economic Policy (NEP) in 1922… A mixed economy put in...

Accumulating wealth and the steps to take in preparing for Financial Independence and funding retirement expenses

Welcome to Finance and Fury, the Say What Wednesday Edition Today's episode is about building wealth and getting ready for retirement Keeping with the Theme – Solving the economic problems Using the resources you have (income, savings, equity, etc.) to get what you...

Never let a good crisis go to waste – The new evolutionary phase of the economic system.

Welcome to Finance and Fury – Last year through September, October and November – was running through the future of the economy – was looking at this through a few episodes – interesting to see a lot of what was discussed playing out now In those episodes – went...

Are we in a property bubble and if so, why?

Welcome to Finance and Fury,  Are we in a property bubble? There is no question that the Australian property market has become significantly overpriced – but is it a bubble and due for a significant downturn? – For this – only talking about capital cities – most of...

How to avoid getting further into debt and get spending habits back in line

Welcome to Finance and Fury. Credit cards and pay day lenders are on the rise, as some of those out of work are becoming strapped for cash. Today, we look at this further but also look at some alternative strategies to avoid the debt traps. We’ll also look at how to...

How to create a rising share market?

  Welcome to FInance and Fury, the Furious Friday Edition.  Following the series of the Lucky Country – You don’t need to have listened to the last few FF eps for this one – rare event – but will be talking about a few related factors, like GDP growth, Interest...

Can following insider’s trades lead to better investment returns?

Welcome to Finance and Fury. In this episode be looking at one piece of information in the share market – insider trading There is a lot of information in the markets that can be looked at – can look at the fundamentals of an individual company – can also look at...

Pin It on Pinterest

Share This