QROPS Australia News Update
QROPS Australia News Update brought to you by QROPS Specialists. Geraint Davies from Montford International gives the low down on transfers for UK expats looking to retire in Australia.
Is it true that I have to move my pension fund within six months of emigrating?
GD: No, and you don’t have to move your pension to Australia even after 6 months. Many migrants make this mistake. In years gone by, you had to move your pension fund because of a very nasty Australian tax assessment on your UK pension. Now, not only have the tax rules been totally overhauled, but QROPS have arrived. The tax hit has been toned down and you no longer have to move your pension to an Australian scheme.
There are 43 countries that operate a QROPS solution for those who call Australia home. And as for the six-month transfer rule; this is a common ploy used by Australian advisors to spook UK pension holders to transfer to an Australian superannuation scheme, when it’s not necessarily in their best interest.
Its true, however, that any transfer to an Australian scheme will only be tax free if made within six months of migration. It’s also true that if you move it within, say, 12 months and the scheme grows by 10 per cent (those were the days!), then the tax deducted from the fund would normally be less than about 1.5% of fund value… and the exchange rate can match that within a day.
QROPS Australia News Update. Should I move my pension to Australia via a QROPS pension transfer?
Do I have to move it at all?
GD: No, you don’t. This strategy of moving a scheme to Australia was abolished in 2006. Today it’s a much more complex and finely balanced decision process. If you are being told by an advisor that you must transfer it to Australia, then walk away. And if you’ve already transferred, get an expert to check out the advice you were given, because you may be due some explanations as to why your retirement plans are needlessly and prematurely trapped in an Australian superannuation. You may find yourself unable to opt for an early retirement, while other expats can.
Under current rules, you can leave your pension where it is until you retire. In 99% of cases it’s not necessary to move it out of the UK. If you have been told this then you should register a complaint against the firm and ask for an advice review.
Can I move my pension to another, third-party country that isn’t Australia?
GD: Yes, and your advisor should discuss what options other countries offer. Some other countries will let you access your pension earlier than the UK (at age 55) and Australia (at age 60), so it’s not only worth looking into, but a necessity when an Australian advisor is keen to get you to transfer..
With such a weak pound at the moment, is it a bad time to transfer my pension?
GD: With the exchange rate as it is, I would only transfer into an Australian fund if it can hold your funds in pounds and allows you to withdraw in pounds (in a form that does not force you into a foreign exchange transfer). Really, I’d only consider this if you need the income to live on immediately. Why move funds when the foreign exchange is at its lowest in living memory? You’ll just lose money. You need to devote serious time to understanding your options.
QROPS Australia News Update. What if I ever want to go back to the UK?
Can I move my fund back to the UK again later on if I need to?
GD: Not without hiring some serious technical expertise. A recent case saw a fee of £20,000 being charged just to embark on the process. It seems outrageous, but that’s going rate for digging that person out of the deepest of tax holes. This required re-drafting of what is called the Trust Deed scheme rules, which is why it’s such a very expensive move. So don’t go there – don’t move a fund to Australia until you know you’re definitely staying for good, regardless of what the foreign-exchange rates are doing.
So what if I don’t stay in Australia? Does my pension scheme remain marooned there? Can I withdraw it from Australia at retirement age?
GD: Yes, you can withdraw your Australian pension when you retire, but if you are back in the UK, there’ll be a massive UK tax charge on return. It’s really not worth moving a fund to Australia, unless you’re 110% sure you are staying for good. If you keep your fund outside Australia for as long as you can (and that doesn’t mean leaving it in the UK), you won’t have to pay these taxes.
And will it be taxed as income in Australia?
GD: It depends. Take these scenarios: A non-Australian QROPS delivering income to an Australian resident’s UK pension fund would be tax assessable. Meanwhile someone on a temporary visa, who is a tax resident in Australia and draws income from a non-Australian QROPS, will not be taxed on that income. Drawing from either a UK scheme or an Australian superannuation will be taxable on that income.
See how finely balanced this decision process actually is. But if you transfer it into an Australian superannuation scheme, as an Australian resident you wouldn’t normally have to pay tax on it. This is one of the advantages of transferring your pension to Australia, actually – as long as you know you’re staying put.
Thanks to Geraint at Montford International. To get the lowest fees and find the best QROPS pension transfer to suit your needs contact a QROPS Specialist today.
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QROPS Australia Pension News Update by QROPS Specialists.QROPS Australia News Update by Richard Malpass