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

 

Is the bank ‘crisis’ over?

Welcome to Finance and Fury. In last weeks episode, I stated that I was going to cover the collapse of SVB, but by now this is old news and there have been further developments – so we will still give a quick recap on SVB but the main focus will be on further...

How to avoid missed investments opportunities experienced by Small Cap Index ETFs

Welcome to Finance and Fury, The Say What Wednesday Edition. Where each week we tackle questions from you – This week's question is from Gab Hi Louis, I have a question I've been pondering lately, around small-cap ETFs or LICs. It seems like the whole reason for...

What leads to hyperinflation and if there is any possibility of seeing that sort of scenario in Australia

Welcome to Finance and Fury, the Say What Wednesday Edition, Where we answer your questions, today's question is from Sol Tau Thanks for the Podcast and all the great info it provides. Could you explain what leads to hyperinflation and if there is any possibility of...

Is the share market at risk of de-risking?

Welcome To Finance and Fury. Is the market at risk of de-risking? Bit of a mouthful – but over the past 12 months the share markets has been going on a run with higher flows of capital going to higher risk shares over those that could be considered defensive shares –...

Take control of your money – nobody else is going to do it for you

Episode 30 Take control of your money - nobody else is going to do it for you Welcome to Finance & Fury! On today’s episode we take look at the best ways to secure your financial future I’m going to share the rules I follow – And how to not be a victim It isn’t...

The mother of all f**kups – Assumptions and their unintended consequences

Welcome to Finance and Fury, the Furious Friday edition Going to run through the last part of the Lucky country – and that is how we can best turn our luck around Through – innovation, freedom of choice, and ignoring narratives based on assumptions Going to skip...

Will the market crash in 2023?

Welcome to Finance and Fury. Will the market crash in 2023? Interesting question – one that many people have answered. Every year - Ipsos asked more than 24,000 citizens of 36 countries to reflect on the year gone by and also make some predictions for the year ahead –...

Where to invest in preparation for the next financial collapse?

Welcome to Finance and Fury Today – Want to start looking at what would likely survive another financial correction or worse, collapse Been thinking a lot recently about the structure of the modern economy – This episode is probably more like a FF ep, but this topic...

Introducing the great reset and what is on the agenda of the World Economic Forum.

Welcome to Finance and Fury, the Furious Friday edition. I hope you are all going well. This episode is all about “the great reset”. It sounds like some weird, out there agenda, but it is carried out by some of the most influential organisations on earth. I want to...

Furious Friday: What are the 4 Cons for Supply-side Economics?

Welcome to Finance and Fury, the Furious Friday edition. We are continuing the series on supply-side economics. Today we will focus on the down-side of supply-side economics. Remember, supply-side economics believes that governments should remove barriers to...

Pin It on Pinterest

Share This