Once over age 55, you can transfer your UK pension to an Australian Superannuation Fund as long as the Superannuation Fund is registered with the HMRC as a Recognised Overseas Pension Scheme (ROPS).
There are several benefits of rolling over to an Australian fund:
- The capital amount you transfer is tax free – both in the UK and Australia
- The growth (applicable fund earnings) that the pension assets have experienced since the member became an Australian resident is taxed at 15 per cent rather than the individual’s marginal tax rate, which could be up to 47 per cent.
- The growth component doesn’t count towards the concessional or non-concessional contribution limit.
- By rolling over to a ROPS, no UK tax is withheld provided the individual is within their lifetime allowance.
You can only transfer your UK pension to an Australian ROPS if you are aged between 55 and 75. If you’re aged between 65 and 74, then you can only transfer to an Australian Superannuation ROPS if you meet the ATO “work test”.
When transferring to a ROPS, you must ensure that you do not go above the Australian superannuation contribution cap limits otherwise you could incur penalty tax. The non-concessional contribution caps are $100,000 per year. However, if individuals are under the age of 65, 3 years worth of non-concessional contributions can be made in one year but then you will not be able to make any further contributions in years 2 or 3.
If a QROPS scheme and member are not resident in the same country then a 25% UK tax will apply on transfer and will be deducted by the remitting scheme. In addition, transfers to a non-ROPS compliant scheme will result in a 40% to 55% tax charge on the transfer from your UK fund.
In most circumstance, it is not cost effective to transfer unless the value of your UK pension is over £50,000. State pensions and certain unfunded public sector pensions (eg NHS, Teachers Pension) cannot be transferred.
Please note that the above is general guidance and it is important that you speak to a qualified financial adviser to consider all your options.