If you’re thinking of retiring to Australia or have already moved there, you may be looking into whether or not you can transfer over your UK pension.
Having your retirement savings with you in Australia can make your money easier to manage. You’ll have your retirement pot in one place, instead of having multiple payments in different currencies coming in. Of course, there are also drawbacks too, such as the tax implications of transferring UK pensions over to Australia.
In this guide, we’ll cover all the essentials you need to know about UK pension transfers to Australia, including how to get started.
What’s more, if you open a Wise multi-currency account, you can use it to save money when it comes to the actual transfer. If you don’t want to lose some of your pension pot to bank fees, currency conversion charges and poor exchange rates, this is absolutely the way to go.
We’ll look at how this works later. For now, let’s look at who is eligible to transfer their UK pension over to Australia and how to get started.
If you’re over the age of 55 years old and have a minimum pension pot of £20,000¹, you should be eligible to transfer a UK pension over to Australia.
You can do this through the Qualified Recognised Overseas Pension Scheme, also known as QROPS.
Overseas pension schemes signed up to QROPS are recognised by HM Revenue and Customs (HMRC) as eligible to receive transfers from UK registered pension schemes.
So, you’ll need to make sure that your Australian pension scheme is QROPS registered.
You can transfer the following from the UK to Australia using QROPS¹:
- Workplace pensions
- Defined benefit or final salary schemes (however, these often come with specific and generous benefits, which you could potentially lose out on if you transfer this kind of pension to Australia)
- Defined contribution schemes
- Small Self-Administered Schemes (SSAS).
An important thing to remember is that you can’t transfer your UK state pension pot to an Australian QROPS¹. Other ineligible pension schemes include unfunded Civil Service pensions such as those used by teachers, NHS workers, the armed forces and the police.
If you do want to receive your state pension in Australia, you can simply claim it provided you’ve made enough UK National Insurance contributions. There may also be some other conditions to meet. You can find more information on how to claim your UK state pension when living in another country on the Government’s website.
Before going ahead with a transfer, it’s very important to think about the tax implications. Here are some crucial things you need to know²:
If you don’t transfer your UK pension to an Australian QROPS (choosing a non-registered pension scheme instead), you’ll pay at least 40% tax on the transfer. And that’s if it actually goes ahead, as your UK pension scheme may refuse to arrange a transfer to a non-QROPS scheme.
If you’re not an Australian resident, you’ll pay 25% tax on the transfer. If you do already live there, you won’t pay any tax.
If you requested a transfer to an Australian QROPS before March 2017, you don’t have to pay any tax.
It could be a good idea to go to a specialist tax or pensions adviser before making your decision. They can walk you through your options, give you all the information you need and help you choose the most tax-efficient solution.
So, you’ve explored all of your options, delved into all of the tax stuff and are eligible to transfer your UK pension over to your new home in Australia. Now it’s time to look at how to actually arrange the transfer.
Here are the steps you’ll need to follow:
- Head to the Government website to find all the information you need to set up the transfer.
- Check with your pension provider to find out its rules on transferring pensions into overseas funds.
- Make sure your chosen Australian pension scheme is QROPS registered - you can do this by checking HMRC’s latest list of qualifying schemes in each country. It’s really important that you double-check your scheme is on the QROPS list, as it could lead to an eye-watering tax bill and the loss of a chunk of your retirement pot otherwise.
- Download Form APSS 263, print it and complete it with all the required information.
- You’ll need your personal details (including National Insurance number and both your Australian address and last UK address) and employment details.
- You’ll also need the Australian pension scheme’s QROPS reference number and other details.
- Give the completed form to your UK pension scheme administrator and follow any of their processes to complete the transfer.
Lastly, there are a few important deadlines and timescales you need to know about, starting with when you first make your transfer request. You must provide all details requested on the form within 60 days of submitting your request or you could face a 25% tax on the transfer².
You must also make the transfer within six months of moving to Australia¹, otherwise other taxes could apply.
And that’s pretty much it. As long as your UK pension provider allows the transfer and you’ve selected a QROPS registered scheme in Australia, you should only have to complete the one form.
Now that you’ve set up your pension transfer, the only other thing to think about is the practicalities of receiving the money. You may be able to avoid paying tax on your pension transfer, but what about bank fees and currency conversion costs?
If you get your pension transfer paid into your Australian bank account, you could lose money unnecessarily to fees and unfavourable exchange rates. But there is an alternative.
Open a Wise multi-currency account and you can receive your pension in GBP, so there’s no need for currency conversion. This means no conversion fees or expensive mark-ups on the exchange rate.
When you’re ready, you can convert to AUD at the real, mid-market exchange rate for just a tiny conversion fee. This gives you full control of the whole process, and could save you a bundle if your pension pot is quite large. You should also be able to use Wise to avoid currency conversion fees and poor rates if you’re claiming your UK state pension while in Australia.
If you like, you can even leave the cash in your Wise account and spend it using your linked Wise debit card. This automatically converts GBP to AUD (or to the local currency wherever you are) at the fairest exchange rate whenever you spend.
There are no foreign transaction fees, only a tiny fee to convert the currency. It’s easy, low-cost and convenient, so you have more time to kick back and enjoy your retirement.
So, that’s pretty much it - everything you need to know about setting up a UK pension transfer to Australia. Provided you do your homework, understand the pension transfer rules and steer clear of tax pitfalls, it should be relatively straightforward.
And at the end of it, you’ll be able to consolidate all of your pension savings and manage your retirement pot all in the one place. This means less time organising your finances, and more time on the beach. Good luck and enjoy your Aussie retirement!
Sources used for this article:
- Unbiased.co.uk - transfer UK pension to Australia
- Gov.uk - transferring to an overseas pension scheme
Sources checked on 25th April 2021
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