UK Pension Transfers to Australia: 7 Questions to Ask Before You Transfer

If you have built up a pension in the UK and now live in Australia, transferring it to Australia can seem like an obvious step.

After all, if Australia is now home, why leave part of your retirement savings on the other side of the world?

But whether a UK pension can be transferred and whether it should be transferred are two very different questions.

A pension transfer can have significant and potentially irreversible consequences. Before making a decision, here are seven questions worth asking.

1. What type of UK pension do you have?

This is the starting point.

A UK defined contribution pension is very different from a defined benefit or final salary pension.

Defined benefit schemes may provide valuable guaranteed retirement income and other benefits that could be lost on transfer. Some pensions may also contain guarantees or protections that aren’t immediately obvious from the current fund value.

Understanding exactly what you own should therefore come before considering where it should ultimately be held.

2. Is your pension actually eligible to be transferred to Australia?

Not every UK pension can simply be transferred into an Australian superannuation fund.

UK and Australian rules both need to be considered, including whether the receiving Australian fund satisfies the relevant requirements.

Age can also be particularly important.

The fact that somebody has moved permanently to Australia does not, by itself, mean their UK pension can immediately follow them.

3. What benefits would you be giving up?

Transfer values tend to attract attention because they provide a single, easily understood number.

But the value of a pension isn’t necessarily represented by its transfer value alone.

Depending upon the pension, there may be guaranteed income, inflation protection, spouse or dependant benefits and other valuable features attached to it.

Before transferring, you need to understand not only what you’re receiving, but also what you’re surrendering.

4. What are the tax implications?

UK pension transfers to Australia sit across two different tax systems.

Your Australian tax residency, how long you have been resident in Australia, growth within the pension since becoming resident and the way a transfer is structured can all be relevant.

This is one of the reasons why copying the strategy used by a friend or colleague can be dangerous.

Their circumstances may look similar to yours while producing a very different tax outcome.

5. What happens if you simply leave the pension in the UK?

This question is sometimes overlooked.

A transfer shouldn’t be assessed against doing nothing. It should be compared properly with the alternative of retaining the pension in the UK.

What income could it provide?

How would it be invested?

What fees would apply?

What guarantees would remain?

How would it fit alongside your Australian superannuation and other retirement assets?

Only then can the alternatives be compared properly.

6. How does the transfer fit into your wider retirement strategy?

A UK pension shouldn’t be considered in isolation.

For many people who have moved to Australia, it represents just one component of their retirement position alongside Australian superannuation, property, investments, cash and potentially other overseas assets.

The important question therefore isn’t simply:-

“Where should my UK pension be held?”

It’s:-

“How should all of my assets work together to fund the retirement I want?”

That is fundamentally a financial planning question rather than simply a pension transfer question.

7. What are you actually trying to achieve?

Perhaps the most important question of all.

Is the objective greater control?

Simplification?

Consolidating retirement assets in Australia?

Managing currency exposure?

Providing retirement income?

Estate planning?

Or simply bringing your finances to the country you now call home?

Until the objective is clear, it is difficult to determine whether transferring the pension is an appropriate solution.

The bottom line

There is no universal answer to whether somebody should transfer a UK pension to Australia.

Two people can have pensions of exactly the same value and receive completely different advice because their circumstances, benefits and objectives are different.

That’s why good pension transfer advice should never begin with:-

“How do we transfer it?”

It should begin with:-

“What are you trying to achieve?”

If you have a UK pension and would like to understand the options available to you from Australia, specialist UK and Australian financial advice can help you assess the alternatives before making an irreversible decision.

If you’d like to understand your options, you can arrange a complimentary intro call with The UK Pension Experts.