How to transfer UK pension to Australia

Dreaming of retiring Down Under? If you’re planning on moving to Australia, one of the things you’ll need to sort out is your pension income.

In this helpful guide, we’ll be taking a look at how to transfer a UK pension to Australia.

So read on for everything you need to know, including whether it’s possible, how to do it step-by-step and which types of UK pensions are eligible for overseas transfer. We’ll also touch on the costs, fees and potential tax implications.

And remember, if you’re looking to move pension savings or other income across international borders, the Wise account is an ideal solution. It offers low transfer fees*, the mid-market exchange rate and a choice of 40+ currencies, as well as being safe and secure for transferring large sums.

Can I transfer my UK pension to Australia?

Yes, you should be able to transfer a UK private or workplace pension overseas to Australia.

However, it all depends on the conditions and restrictions of your particular pension scheme. You’ll also need to move your pension to what is known as a Qualifying Recognised Overseas Pension Scheme (QROPS) in Australia.

This means that it’s on HMRC’s list of approved QROPS schemes, and it could make it easier to transfer your pension. Crucially, it could help you avoid a high tax bill. We’ll cover QROPS in more detail later in this guide.

There are also a handful of location-specific rules to be aware of.

To move your pension to Australia, you’ll need to be transferring a minimum of £20,000 and you’ll need to be at least 55 years old. This is due to QROPS rules relating to Australian superannuation schemes that allow people to have access to their pension.¹

It’s important to remember that transferring UK-based pensions abroad may have significant tax implications. These can sometimes be complex and costly, depending on the country you’re moving to. So, it could be a good idea to speak to a pensions or tax specialist to get some expert advice.

Which UK pensions are eligible for transfer to Australia?

Not every type of UK pension is eligible for transferring overseas.

You won’t be able to transfer your UK state pension, for example. However, you can apply to receive your state pension payments while living in Australia. If you’re up-to-date with your National Insurance (NI) contributions, you can apply to the International Pension Centre within 4 months of your state pension age.²

It’s not possible to transfer unfunded civil service pensions abroad either. This means that you may not be able to move this kind of pension if you’re a teacher, police officer or NHS worker.¹

You should be able to transfer the following pension types from the UK to Australia:¹

• Occupational pension schemes
• Defined benefit schemes
• Defined contribution schemes
• Small Self-Administered Schemes (SSAS).

It’s important to check the specific conditions of your pension though. Some, such as defined benefit schemes, can have restrictions on transfers.

How to transfer your UK pension to Australia - a step by step guide

To transfer a UK pension to Australia, there are a few key steps involved.

You’ll need to check that your pension is eligible for transfer, find a suitable QROPS scheme in Australia and then complete the forms to apply. We’ll run through these steps in more detail in just a moment.

But first, some useful info on QROPS and how these schemes work.

Qualifying Recognised Overseas Pension Schemes (QROPS)

The most crucial part of transferring a UK pension overseas is finding a QROPS. These are pension schemes that have been vetted and approved by HMRC, and which allow UK nationals to transfer their pensions overseas.

Most UK pensions can only be moved to a QROPS. It may be possible to move your pension to a non-QROPS scheme, but you’ll face a whopping 40% tax bill on the transfer.³

It’s important to note though that transferring your pension to a QROPS in Australia may not mean you avoid tax charges altogether.

Steps to transfer your pension

Here’s a quick look at the process for transferring your pension from the UK to Australia:

1 - Find a QROPS scheme

The first step is to find out if there are suitable QROPS available in the country you’re retiring to. The easiest way to do this is on the recognised overseas pension schemes notification list here. Sorted alphabetically by country, these are all the schemes that meet HMRC’s requirements to be a QROPS.

The good news is that Australia is on this list, and there are a large number of different QROPS to choose from.

2 - Check that your UK pension allows transfers

The next thing to do is get in touch with your pension provider to find out if it permits transfers overseas. It should if it’s a QROPS you’re transferring to, but it’s always worth double-checking.

There may also be conditions, costs or other tax implications you need to know about before setting up the transfer.

And remember that you won’t be able to transfer your pension to Australia if you’re not yet 55 - or if the value of your pension pot is less than £20,000.¹

3 - Complete the application form for the transfer

Once you’ve done some research and spoken to a financial advisor or pensions specialist, it’s time to apply for the transfer.

You’ll need to download and complete Form APSS 263 from the UK Government website. This asks for information such as:

• Your personal details and National Insurance number
• Address and contact information for you in the UK (or your previous UK address if you’ve already moved)
• Details of the QROPS - including the name, address, country in which the scheme is established and regulated and its HMRC reference number
• Your employment details (if relevant)

Once you’ve completed the form, you’ll need to submit it to your UK pension scheme administrator to start the transfer process.

It’s really important to make sure you check your form carefully before submitting it, and don’t miss out any information.

If you are asked for more info, provide it promptly. If you fail to provide all the requested details within 60 days of submitting your form, your transfer will be taxed at 25% - whether or not you’re exempt from other taxes or charges.³

Timeframes and costs involved

The time it takes to transfer a UK pension overseas varies. It depends on the processes (and efficiency) of the pension providers involved in both countries, as well as how quickly you respond to requests for information.

You’ll need to speak to your pension provider (and perhaps the QROPS provider in Australia too) to find out more about specific timeframes for the transfer to be completed. But as a minimum, you can expect it to take a few months.

In terms of costs, there is one main charge you need to know about. This is the overseas transfer charge of 25%. If you’re living in the same country as the QROPS you’re transferring to, you shouldn’t have to pay this charge.¹

However, it may apply if your transfer exceeds your overseas transfer allowance (OTA). This is currently set at £1,073,100, although it can differ in some circumstances. If you exceed your OTA, the 25% charge may be payable on the excess.³

Tax considerations of transferring your UK pension to Australia

Tax is never simple, especially when pensions are involved. This is why it’s always a good idea to get some professional advice before transferring a pension to another country.

But generally speaking, here’s what you need to know about tax when you move a UK pension to Australia.

If you’re living in the same country as the QROPS, you shouldn’t be liable for tax on the transfer. So if you’ve already moved to Australia and live there permanently, and transfer your UK pension to an Australia-based QROPS, you won’t have to pay tax.³

However, there are still some tax implications you need to know about, depending on your circumstances.

Here are some of the circumstances in which you will have to pay tax on your pension transfer to Australia:

• If you make a transfer that exceeds your overseas transfer allowance (OTA) of £1,073,100, you’ll pay tax of 25% on the excess.³
• If you transfer your pension to a non-QROPS (which is usually not permitted, but still technically possible), you’ll pay up to 40% tax on the whole of the transfer amount.³
• If you don’t make your pension transfer within six months of moving to Australia, you could face additional taxes.¹

Discover the Wise account

Save money on pension transfers to Australia with Wise

After reading this, you should have a better idea of how to transfer your UK pension to Australia, including the steps, costs and taxes involved.

But it’s also important to think about how you’ll actually receive your pension sum in Australia. A key consideration is that your pension pot will need to be converted from British pounds (GBP) to Australian dollars (AUD).

If you use a local bank account, you could be stung by high currency conversion fees and poor exchange rates. As it’s likely to be a large amount you’re transferring, this could make a serious dent in your retirement funds.

Luckily, there’s a better solution available. Open a Wise account and you can manage your money in 40+ currencies, including GBP and AUD.

You can use it to send and receive money internationally, for low fees* and mid-market exchange rates.

This could be hugely useful for transferring your pension between countries, or even for receiving your UK state pension or other UK-based income while living in Australia.

Sign up with Wise today

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Sources used:

1. Unbiased - Can I transfer my UK pension to Australia?
2. GOV.UK - State Pension if you retire abroad
3. GOV.UK - Transferring your pension

Sources last checked on date: 23-Sep-2024