If you have worked in the UK and now live in Australia, understanding what to do with your UK pension can be complicated.

UK pension rules, Australian superannuation legislation and the tax systems of both countries can affect the options available to you. The appropriate course of action will depend on the type of pension you hold, the benefits it provides and your individual circumstances.

At The UK Pension Experts, we specialise in helping people living in Australia understand their UK pension benefits and the options available to them.

Our role is not simply to facilitate pension transfers. It is to help determine whether retaining, transferring or restructuring your UK pension is appropriate for your circumstances.

Understanding Your UK Pension

The starting point is establishing exactly what type of UK pension you have and what benefits it provides.

UK pensions can include:

• Defined contribution workplace pensions.
• Personal pensions.
• Self-Invested Personal Pensions (SIPPs).
• Defined benefit or final salary pensions.
• Career-average pension schemes; and
• Funded or unfunded public-sector pension arrangements.

Different pension types have different rules, benefits and transfer options.

Before considering a transfer, it is important to understand what you currently have and what you could potentially be giving up.

Defined Contribution Pensions

A defined contribution pension generally provides an accumulated fund value rather than a guaranteed level of retirement income.

Depending on the pension and your circumstances, options may include retaining the pension in the UK, consolidating UK pension arrangements, or considering a transfer to an eligible Australian superannuation fund.

Factors to consider can include investment options, costs, access to benefits, taxation, currency exposure and your long-term retirement plans.

A transfer should only be considered after comparing it with the alternatives available under the existing UK arrangement.

Defined Benefit and Final Salary Pensions

Defined benefit pensions require particular care.

These schemes can provide valuable benefits, including guaranteed retirement income and, depending on the scheme, inflation protection and benefits for a spouse or other eligible beneficiary.

Some funded defined benefit schemes may permit a transfer, but transferring generally means permanently giving up the guaranteed benefits provided by the scheme.

For this reason, the decision should not be based solely on the transfer value offered.

The benefits of retaining the pension need to be compared carefully with the potential advantages and disadvantages of transferring.

Can My UK Pension Be Transferred to Australia?

Not every UK pension can be transferred to Australia.

Whether a transfer is possible can depend on:

• The type of UK pension.
• The rules of the UK pension scheme.
• Your age.
• Your Australian residency and circumstances.
• Australian superannuation contribution and acceptance rules.
• Whether the proposed Australian receiving fund meets the relevant UK requirements; and
• UK and Australian taxation.

The UK State Pension cannot be transferred to Australian superannuation, and certain unfunded UK public-sector pension arrangements are also subject to transfer restrictions.

Even where a pension is eligible for transfer, this does not mean transferring will necessarily be appropriate.

UK and Australian Tax Considerations

UK pension transfers to Australia can have tax consequences in both countries.

On the Australian side, considerations can include applicable fund earnings (AFE), Australian superannuation contribution rules and the tax treatment of benefits once they are held within Australian superannuation.

UK considerations can include the Overseas Transfer Allowance and, depending on the circumstances, the Overseas Transfer Charge.

Tax treatment can depend on the individual’s circumstances and the way a transfer is structured. These issues should therefore be considered before a transfer is implemented rather than after the funds have moved.

Australian ROPS

For certain UK pension benefits to be transferred directly to an Australian superannuation fund with the intended UK tax treatment, the receiving arrangement will generally need to meet the relevant UK requirements.

HM Revenue & Customs maintains a list of overseas schemes that have notified HMRC that they meet the conditions to be a Recognised Overseas Pension Scheme (ROPS).

Being included on the HMRC list does not, by itself, guarantee that a particular transfer will qualify for the intended UK tax treatment.

Both the receiving arrangement and the individual transfer therefore need to be considered.

What If I Am Under Age 55?

Being under age 55 does not mean that a UK pension should automatically be transferred to another UK pension arrangement.

The options available will depend on the pension you hold and your circumstances.

Where a direct transfer to an Australian ROPS is not currently available, the appropriate course may simply be to retain the existing UK pension until the position can be reviewed at a later date.

In other circumstances, there may be reasons to consider alternative UK pension arrangements. Any such recommendation should be based on the benefits, costs and risks involved rather than solely on facilitating a future transfer to Australia.

Should I Transfer or Keep My UK Pension?

This is ultimately the more important question.

A pension being transferable does not mean that it should be transferred.

A comparison should consider factors such as:

• Guaranteed benefits provided by the existing pension.
• Expected retirement income.
• Investment options and risk.
• Fees and charges.
• UK and Australian taxation.
• Currency exposure.
• Access to retirement benefits.
• Death benefits and estate-planning considerations; and
• Your long-term residency and retirement objectives.

For some people, transferring an eligible UK pension to Australia may be appropriate.

For others, retaining the pension in the UK may provide the better outcome.

How We Can Help

The UK Pension Experts specialise in the interaction between UK pensions and Australian superannuation.

Our advice process can help you:

• Identify and understand your existing UK pension benefits.
• Establish the options available under your UK scheme.
• Determine whether your pension may be transferable.
• Understand the relevant UK and Australian considerations.
• Compare retaining your existing pension with the available alternatives; and
• Implement an agreed strategy where appropriate.

The objective is to provide you with the information and advice required to make an informed decision about your retirement benefits.

Discuss Your UK Pension With Us

If you live in Australia and have a UK pension, an initial consultation can help us understand your circumstances, identify the options that may be available and determine whether specialist advice may be appropriate.

There is no obligation to proceed following an initial consultation.