UK PENSION TRANSFER
UPDATE
UK pension transfer needs to be in Australia before 6 April or you could face 40% tax when you take it out of the UK.
UK inspired changes which will apply from April 6 2006, could make it difficult to make a UK pension transfer and roll funds into Australian superannuation schemes, particularly self managed funds. (Only private or employer based pension schemes affected not the govt based pension)
Changes are being introduced to simplify the taxation treatment of UK pensions (currently subject to 8 different regimes). NB: The tax on the UK pension transfer will be levied in the UK NOT by the Australian Government.
What happens now? (Pre 6th April 2006)
If you have left the UK to live in Australia on a permanent basis and have no intention of moving back to the UK to work or retire then moving your pension over to an Australian complying super fund is what a majority of migrants would be advised to do. Note: you need to take financial advice before transferring your fund as there are certain requirements that need to be met and in some cases it may not be to your best advantage to move your pension.
If you do transfer your UK funds into an Australian super scheme within six of arrival in Australia it means you pay no tax. Once the initial six month period has expired then expect to pay tax at 15 per cent on the growth component of your pension from when you left the UK to when the funds are brought into Australia. Once your pension is transferred to Australia you are only subject to Australian superannuation rules.
What will happen post April 6th 2006?
You will be able to transfer your pension tax free if you are transferring into a qualifying recognised overseas pension scheme (limits apply currently £1.5 million at which point you will pay tax at 25 per cent). However, if the transfer is unauthorised then you are looking at a tax bill of 40 per cent.
Things are still to be finalised but currently no Australian superannuation fund appears to meet the new requirement. If you are already an Australian resident then you may want to be taking advice on moving your pension NOW if you have not already done so. If you are yet to make the move down under then there is nothing you can do but wait and see what the final outcome is.
If you would like to know more information as it becomes available then drop Simon at AustAsia Group your e-mail and he will add you to the relevant distribution list.
DISCLAIMER
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