5 July, 2015

Pension transfer FAQ's

Pension Transfer FAQ's

Collected below are a series of common questions and answers related to pension transfers into Australia. They are not intended to supplant professional advice in this area, but rather to provide people with background material so that they can have a balanced discussion with advisors both about the pros and cons of transferring pensions, and about the process.

Can I transfer my UK pension(s) to Australia?

Almost all pension funds in the UK are capable of being transferred to Australian superannuation funds; including private sector, Government, NHS and personal pensions; regardless of whether they are defined benefit (final salary) or defined contribution schemes.

However, this does not extend to British State pension and no transfer of any funds is possible once you start receiving a pension. UK pensions must also be transferred into a QROPS fund, or pay very significant penalties; we have devoted a separate page to QROPS.

What about pension from other countries, such as the US, Canada, South Africa and Europe?

There is usually no problem in a pension transfer being accepted by a complying Australian superannuation fund, regardless of source. Most issues revolve around whether it is appropriate to transfer the funds bearing in mind home country factors; such as early release penalties (eg. withholding tax), the lump sum valuation and size of the fund; and issues such as whether the funds might be taxable in Australia via FAF regulations. Actuarial, and sometimes tax advice, is central to this sort of analysis.

 What sort of Super Fund can I transfer my Funds into?

There is no limitation on what sort of fund you can transfer your pension fund into; including a Self Managed Superannuation Fund (SMSF or DIY Fund). It is probably appropriate that you take financial advice in terms of what sort of fund suits your personal requirements. As regards UK transfers, there were initially very few QROPS certified funds in Australia; now there is quite a range and it is relatively simple for even a SMSF to apply for, and gain, QROPS status.

Be careful however; QROPS funds are unable to used for a variety of investments - including residential real estate - and you should seek appropriate professional advice.

How much can I transfer into Australia - are there any restrictions?

As we mention elsewhere on the website, as an interim measure announced as part of the new superannuation regime, you had until 30 June 2007 to transfer funds of up to $1million into superannuation. Currently, you may transfer up to $180,000 per annum as non-concessional contributions, or you can bring forward up to two years contributions and submit $540,000 over a period of three year. Once you 65 years of age or older you may no longer bring forward contributions and your contributions are limited to $180,000 per annum, subject to your meeting a "work test".

For a variety of reasons, pension transfers in excess of AUD540,000 are considerably more compex than single transfers; requiring specialist financial planning and tax advice.

Is any tax levied on my transfer to Australia?

We address this in a separate page but in short the answer is no if the transfer takes place within 6 months of your becoming resident in Australia. Thereafter, you will be taxed on the growth in your funds from the date you became resident; you can however elect for the pension fund to pay the tax at the rate of 15%. If you do not elect, then you will be taxed at your marginal rate. In general this means you are better off completing a transfer within the 6 month period. The actual time taken by the transfer process is influenced by a number of factors and can vary from quick and easy to very protracted; so you are safer taking early action.

What happens if I leave my Pension overseas?

In general, once you start receiving your pension it will form part of your income for Australian taxation purposes and you will pay tax at your marginal rate. You will not pay tax until this point, unless your pension fund is caught under Australia's Foreign Accumulation Fund (FAF) rules which are currently in the process of change and are unclear as to their impact. See our separate section regarding FAF rules and if you have concerns then you should consult a tax advisor experienced in this area.

What if I leave Australia, can I transfer my pension with me?

There are very few situations where you can have early access to an Australian superannuation fund and normally your pension funds would not be available for transfer out of Australia. One exception is people in Australia on certain visas, they can gain access to superannuation, but a tax charge of 35% applies.

If you have decided to move permanently overseas and your superannuation is significant in size then we recommend you see a financial planner with a view to ensuring that your investments match your requirements.  There may be an argument to bias your investment profile towards the currency/region in which you intend to retire, in order to better match your requirements and to limit your currency risk. 

Who gets my superannuation when I die?

In the event of death, your superannuation fund will usually be paid out to your nominated beneficiaries either as a lump sum or pension - unless other parties make claims on the Trustees. This can be one of the benefits to transferring a fund to Australia in some other countries, such as the UK, your qualifying beneficiaries would often receive only a partial pension.  The taxable component of your fund will be tax free if paid to a dependant (a spouse is always a dependant) but may be subject to a 16.5% tax if paid to a non-dependant.

What are the Fees for transferring my funds to Australia?

Our fees are not based on the value of funds transferred, as happens with many other firms. In terms of single UK transfers, they comprise a fee of $AUD1500 to cover the actual, physical transfer process. Fees for tax and actuarial advice, if needed, will be quoted separately in advance. Fees will also be separately quoted in advance for large transfers; those involving multi-years transfers are considerably more complicated than single transfers.

For transfers from other countries such as the US, Canada, South Africa and Europe circumstances can vary quite considerably and we will provide a fixed fee quotation on request.

Is my money safe while being transferred?

 The pension funds being transferred are remitted directly, usually by telegraphic transfer and sometimes by cheque, from your current pension fund into your Australian superannuation fund. They are not, and should not, be paid into any adviser's trust account and they are consequently entirely secure. Fees applicable for the Actuarial report and transfer process are not deducted from any transfer - they are invoiced directly to clients for payment.

IMPORTANT: The material contained in this website and other associated communications is only intended as general, background information and must not be relied upon. No warranty is provided in relation to any material or to the services that may be contracted through exfin.com. It is recommended that individuals seek the advice of qualified professionals before taking any action.