International Pension Funds as an Alternative to Superannuation
Superannuation structures within Australia provide a tax effective environment within which to save for retirement. However, it provides a low tax environment only within an Australian context - with both contributions and earnings (until retirement) still attracting tax. Depending upon your personal circumstances, including the host country in which you are located, whether you intend to pursue a long term expatriate career and your retirement plans - it may be beneficial for you, and your employer, to consider participation in an International Retirement Plan. The benefits of participation in an International Retirement plan can typically include:
- Investment earnings being generated in a low, or no tax, regime
- Portability, with expatriates potentially remaining members of a single fund throughout their working life in a variety of locations offshore.
- Flexibility to allow the expatriate to choose their own investment funds, or for an employer to appoint an investment manager.
- Relatively simple, outsourced, online administration for employers which still allows them to determine vesting and retirement guidelines.
Before deciding to pursue such an option - whether as a substitute for Australian superannuation or as a top up in addition to contributing to those funds - you must receive appropriate professional advice to ensure that there is an appropriate fit for your circumstances. If you ask why participation in these structures might be preferred to simply maintaining an overseas investment account, there are a number of tax planning advantages associated with foreign superannuation funds. If the superannuation fund is properly set up, on return to Australia the member's benefits can remain offshore and continue to grow with eventual taxation on reduced basis consistent with Australian superannuation. However, these structures are relatively complex to set up and maintain and the fund balances will typically need to be quite substantial to offset these additional costs.
We would stress that this is an area that absolutely requires expert professional advice prior to any participation to ensure that all the legal requirements are met.