If you’re emigrating to Australia from the UK you’ll probably be worried about getting your visa, passing the medicals, figuring out where to live and getting a job. Rightfully so, but there’s one step that far too many Brits think about too late or even worse, not at all and this could be costing them Tens of Thousands of pounds!
Pensions are not the most thing to talk about but I was lucky enough to talk to Darion Pohl of Prism Xpat. Darion has many years and countless qualification in the area of UK to Australia pension transfers and he made the whole area interesting and understandable and when he talked about the huge amount of money that many Brits emigrating to Australia can save is they make the right financial decisions then I became really excited!
He revealed to me 10 essential tips that every Brit planning to emigrate to Oz should seriously consider.
Prior to commencing, I must point out that any tips and information in this article is general in nature, is information only and should in anyway be construed as being financial advice. Each person’s financial situation will be different and you should seek professional advice from a cross border pensions specialist to determine the best way to act.
#1 Remember – Your pension is an investment for your retirement!
Remember that you are generally unable to access your pension funds until you have reached retirement age. Whilst being a very tax efficient savings vehicle, pension funds are locked in for long term savings. You can’t normally use your pension funds for present day expenses such as deposit for a house, school fees, buying a car.
#2 – Not all pensions can be transferred to Australia from the UK.UK State pensions cannot be transferred to Oz and there are requirements that personal pensions need to reach if they can be transferred to Australia.
#3 – A pension transfer from the UK to Australia is not always in your best interest
Research by PrismXpat has shown that, after considering the UK and Australian tax effect, up to 30% of schemes should not be transferred. By making a transfer, you are forgoing precious benefits such as fund penalties, insurances and Guaranteed Annuity.
Exchange rate differences, poor fund growth with t he dip in share market, as well as tax exemptions on your visa type also need to be considered as they can turn the decision one way or the other.
#4 Start Early
A 6 months time limit applies for many people to have their pensions transferred over to Australia. Anytime beyond this can create an excess tax liability for you. In reality the process can take 9 months or longer complete.
This means you should contact a pension transfer specialist at least 3-6 months before your departure date. By dealing with a specialist company with a strong UK base, a significant amount of time will be saved in chasing up pension schemes. This can be very difficult if you try to do this from Australia due to time zone differences.
#5 Keep your pension company informed.
A simple but important one that’s often overlooked. Let your pension companies know your change of address so they can continue to contact you after you have left the UK
#6 Get Your Paperwork Sorted
The wheels of the UK Department of Work and Pensions grind very slowly so get your paperwork completed to know what your UK state pension entitlement is before you leave.
#7 Your Visa type can affect Pension Fund
Some visa classes have tax exemptions that can have a dramatic effect on the value of your UK pension on transfer to Australia. Contact a cross border Pension Transfer specialist BEFORE making your final visa choice to see if there are any tax benefits available to you. This is particularly worthwhile if you pension fund is worth more than £30k.
#8 Make sure you’re getting correct advise from ‘both sides of the fence’
Your Financial Advisor in the UK may be excellent but how well do they know the Australian tax system? For peace of mind, make sure that you seek advice from a specialist with knowledge of both the UK and Australian tax and pension systems. Be wary of any adviser who offers to assist you with this work if they only have UK based qualifications or only have Australian based qualifications.
Transferring your pension from the UK to Australia can save you a significant amount of tax, in many cases over 30% of the fund value. This is due to the differences in the UK and Australian systems
#9 There are limits on what can and can’t be transferred
Many People with pension funds exceeding $150,000 or $450,000 will not be able to have their pensions transferred to Australia without incurring a large tax liability. There opportunities to benefit from strategic advice from the UK side in these cases which a cross border pension transfer specialist can advise you on.
#10 Get Advise Early & Consider the Big Picture!Whilst substantial opportunities exist for Australians with UK pensions to save tax, there are even more opportunities if you begin your financial planning long before you leave the UK and take into account all your savings & investments.
Author : Neal Gourley