Can I transfer my UK pension to Australia?

For decades, Aussies have called the United Kingdom home and discovered what Europe has to offer, while British expats have swapped cooler climates for Australia’s sun and surf. If you’re now residing in Australia, but have accrued funds in a UK pension, you might want to use the money for your retirement.

Transferring UK pension to Australia is possible, but eligibility criteria apply under both Australian and UK law. For example, you generally need to be at least 55 years of age or older.

How can you transfer a UK pension to Australia?

There are four different options to consider when moving a UK pension to Australia:

1. Organising a transfer from a UK pension fund to an Australian super fund listed under the UK Government’s Recognised Overseas Pension Scheme (ROPS)
2. Using a self-managed super fund (SMSF).
3. Joining the Australian Expatriate Superannuation Fund (AESF).
4. Transferring your pension funds into an Australian or British bank account once you turn 55.

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What are the steps to move a UK pension to Australia?

Here are six steps you can take to move a UK pension to Australia:

1. Contact your UK pension provider and find out its rules for applying for a pension transfer.
2. Decide how you’ll coordinate the transfer, such as whether you’ll use an Australian super fund, an SMSF, join the AESF or organise a bank account.
3. If you’re using an Australian super fund, contact them and ask if they’re on His Majesty’s Revenue and Customs (HMRC)’s ROPS list. The HMRC is the Australian Tax Office (ATO)’s UK counterpart.
4. Find out the rules, terms and conditions that apply (e.g. fees, taxes, monetary limits, timeframes) for each method you’re considering.
5. Consider seeking professional legal and financial advice before going ahead.
6. If you choose to go ahead, sign the paperwork for the transfer.

What should you consider with transferring a UK pension to Australia?

Your personal circumstances, including what super fund you are with or plan on joining, will be an important factor to consider. Whichever option you decide on, seeking professional financial (including tax) and legal advice can also be an important consideration.

Other than the AESF, you may find there are very few (or even no) Australian retail or industry super funds on the HMRC’s ROPS list. At the time of writing, none of the 10 biggest super funds in Australia feature on the list.

If you have a SMSF, for example, you may consider seeking legal advice about getting your fund’s membership restricted to people aged over 55 (for compliance with the UK’s requirements). If you don’t have a SMSF, it’s a much bigger financial decision when considering whether to set one up. You can read more about the key steps, important rules and common costs involved in setting up a SMSF.

What Australian requirements apply to UK pension transfers?

You may be eligible to transfer your UK pension to a compliant Australian super fund, depending on your circumstances. It’s important to remember that a transfer from a foreign super fund (such as the UK pension) to a complying Australian super fund is treated as a member contribution and as such is subject to the same restrictions and limits that apply to contributions generally.

However, the Australian Taxation Office (ATO) says there are certain conditions that must be met before an eligible Australian super fund can accept your UK pension funds.

1. Age limits

Age limits apply based on the time of transfer for UK pensions to an Australian super fund. According to the ATO, these are as follows for contributions:

• Under 75 years old: Your Australian super fund can accept a member contribution, such as personal contributions and salary sacrifices, even if you’re not working.

• 75 years or older: Your Australian super fund cannot accept a member contribution for you if you are aged 75 or more (unless it is made before the 28th day of the month after the month you turn 75).

Because you generally need to be 55 years of age or older to transfer a UK pension to Australia (based on UK requirements), these age limits are particularly important.

2. Tax file number (TFN) requirements

The ATO says complying Australian super funds cannot accept a transfer from a foreign fund unless:

• you have given your Australian super fund your Tax File Number (TFN),

• or have given them your TFN within 30 days of making the foreign transfer.

If your Australian super fund doesn’t have your TFN within 30 days of making the transfer, they’ll need to return the whole amount to your foreign fund.

3. Income tax

You’ll have to pay income tax on the applicable fund earnings component of a foreign fund transfer, according to the ATO. In other words, you’ll generally have to pay income tax in Australia on the money your UK pension fund has earnt since you became an Australian resident. However, you don’t have to pay tax on this money if you transfer it to a compliant Australian fund within six months of either becoming a resident of Australia or your employment ceasing in the UK, under what’s known as the six-month rule.

4. Excess contributions tax

The ATO says excess contributions tax may also apply if the UK pension money you transfer means you go over one of your contributions caps.

What UK requirements apply to UK pension transfers?

His Majesty’s Revenue and Customs (HMRC) also sets its own requirements for transferring funds from UK to non-UK funds, including Australian super funds:

• Age limits – Most personal pensions set an age when you can start taking money from them, and according to the UK Government, it’s not normally before the UK’s minimum pension age of 55.

• ROPS providers only – the scheme you want to transfer your pension savings to must be a ‘recognised overseas pension scheme’ or ROPS. Prior to 1 July 2015, this list was known as the ‘qualifying recognised overseas pension scheme’ (QROPS) list.

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What are QROPS and ROPS?

A ‘QROPS’ is a ‘qualifying recognised overseas pension scheme’, while a ‘ROPS’ is a ‘recognised overseas pension scheme’. In the Australian context, both terms refer to a super fund authorised to receive money from a UK pension fund.

According to the UK Government, if your super fund is not eligible as a QROPS/ROPS, your UK pension scheme may refuse to make the transfer, or you’ll have to pay at least 40% tax (potentially up to 55%) on the transfer. Additionally, the UK Government is clear that it’s up to you to check with your fund if it’s a ROPS.

On 1 July 2015, HMRC’s recognised overseas pensions schemes (ROPS) notification list replaced the HMRC QROPS list, which had been put in place in 2006. According to Australian-based advisory firm Sterling Planners, as well as a name change, fund eligibility requirements changed when ROPS replaced QROPS. As a result, “many funds – both in Australia and globally – were removed from the list and are no longer eligible to transfer funds into”.

One reason for this is that under the UK’s new rules, a fund is not eligible to be a ROPS if it allows its members to withdraw their money before the age of 55 (except in cases of severe ill health), whereas Australian law also allows super funds to release money early for other reasons, such as severe financial hardship.

Are there any UK pensions you can’t transfer to Australia?

According to IVCM, a global retirement solutions provider, you can only transfer certain types of UK pensions to Australian ROPS.

You can transfer the following types of UK pensions to an Australian ROPS:

1. An Occupational Pension Scheme.
2. A Defined Benefit Scheme (i.e. a Final Salary Scheme). It’s important to note that if you want to transfer a defined benefit pension valued at £30,000 or more, UK law requires you to seek professional financial advice before doing so.
3. A Defined Contribution Scheme (i.e. a Self Invested Personal Pension or SIPP, or Personal Pension).
4. A Small Self Administered Scheme (SSAS).

The following types of UK Pensions cannot be transferred into an Australian ROPS:

1. A UK State Pension.
2. An Unfunded Civil Service Pension, including a National Health Service (NHS), Teachers, Fire Fighters, Police or Armed Forces Pensions.

As IVCM is not authorised to provide financial advice, it recommends seeking professional financial advice to support your decision-making with transferring a UK pension to Australia.

Can my super fund receive a UK pension transfer?

If you’re looking to transfer your UK pension to your super fund in Australia, you should check with your fund to find out if it’s registered as a ROPS or not. You can find a full list of schemes that have told HMRC they meet ROPS requirements on the UK Government website.

Changes to the UK pension laws made in 2015 rendered a significant number of Australian super funds unable to receive UK pension transfers. This was because UK pension laws now require that a super fund unconditionally guarantee an absolute minimum access age of 55, with limited exceptions, such as in certain cases of ill health. Australian funds which didn’t provide this guarantee – or couldn’t provide it due to their legal obligations in Australia – were barred from accepting UK pension transfers.

As detailed by the ATO, many Australian funds, including some of the biggest retail and industry funds, also allow members to have early access on other grounds, such as financial hardship, in line with local superannuation laws. As a result, almost all of these funds are no longer eligible to receive UK pension transfers.

My fund isn’t a QROPS or ROPS – what are my options?

If your fund is not permitted to receive UK pensions, the ATO suggests you have three other options:

1. Use a self-managed super fund (an SMSF).
2. Join the Australian Expatriate Superannuation Fund (AESF).
3. Transfer your pension money into a bank account (Australian or British bank account once you turn 55).

1. Using an SMSF

Because the rules of an SMSF are set by the trustee(s) – who are also often members of the fund – they can be relatively flexible, although they must still comply with Australian superannuation and tax laws. It may be possible to set an SMSF up for yourself and have it registered as a ROPS to transfer your UK pension to, though you may want to seek professional advice to ensure it qualifies as a ROPS.

However, unless the amount of money you’re looking to transfer is significant, setting up an SMSF purely for the purposes of transferring your pension across to it may not be cost-effective. The administrative costs of setting an SMSF up, combined with any specialist advisory services you may require, can stack up quickly.

If you decide that setting up an SMSF will be a cost-effective way of recouping your UK pension, you will need to:

1. Set up your SMSF, making sure that the wording of the trust deed is compliant with UK pension regulations and that the SMSF is correctly set up under Australian law.
2. Lodge a request for the SMSF to be registered as a ROPS with HMRC – this can be done online, and in order to do so you will need to provide the details of your SMSF, along with its trust deed.
3. Wait for HMRC to process your request.
4. If the request is approved, then once your SMSF is registered as a ROPS, obtain, complete, and submit the required paperwork to release your UK pension and have it transferred to your SMSF.

Once you’ve received your pension funds, you can either carry on using the SMSF, or roll your pension money into your regular super fund and shut down the SMSF if you want to avoid dealing with the ongoing administrative requirements of managing it. This process is often not as straightforward as an ordinary SMSF rollover would be. For example, the UK Government warns that you may be charged a 25% tax rate if you transfer UK pension money from one Australian ROPS to another, and a 40% ‘unauthorised payment’ tax rate if you transfer it to a non-QROPS or ROPS super fund.

Given how complex some of these decisions can be, you may want to seek independent legal and financial advice before proceeding.

Related: SMSFs: 8 things you need to know before you jump in

2. Signing up with the Australian Expatriate Superannuation Fund (AESF)

The Australian Expatriate Superannuation Fund (AESF) is currently Australia’s only retail super fund that’s registered with the HMRC as a ROPS under the ‘Tidswell Master Superannuation Plan’. It is a fund tailor-made for those looking to have their UK pension transferred to Australia. Joining the AESF may be a simpler option than setting up a SMSF; however, keep in mind that some fees may still apply, such as initial set-up fees, transfer fees, and investment management or administration fees. You can contact the AESF and read their Product Disclosure Statement (PDS) for more information.

3. Transferring your pension money into a bank account

Once you reach 55 (Britain’s current preservation age), you can simply have the money paid out from your UK pension scheme into an Australian or British bank account. However, both options might have tax implications:

• If you choose to have your whole pension paid out into a British bank account, the UK government’s MoneyHelper website advises that while the first 25% will likely be tax-free, the remainder will be taxed at your regular marginal tax rate by adding it to the rest of your income earned in Britain.

• If you choose to have your whole pension paid out into an Australian bank account (which only some pension providers will allow), the UK Government warns you may be subject to fees or other financial penalties.

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How much money can you transfer from a UK pension to Australia?

Limits apply to what money can be transferred to Australia from a UK pension without incurring an Australian tax penalty. According to the ATO, UK pension transfers are classified as a non-concessional (after-tax) member contribution. So, what does this mean based on your age?

The ATO states that if you are under 75 years of age at any time in a financial year you may be able to make non-concessional contributions of up to three times the annual non-concessional cap in that financial year using the annual cap from future years, also known as a bring-forward arrangement. The non-concessional contributions cap is currently $120,000. This means you could access a cap of up to $360,000 plus fund earnings (investment growth) without being liable for an additional tax charge.

If you’re 75 years or older for all of the financial year, you won’t be eligible to use the bring-forward arrangement for that financial year. Generally your super fund will only be able to accept employer and downsizer contributions after you pass the age of 75.

What tax implications may apply if you transfer a UK pension to Australia?

The ATO advises that you may have to pay income tax on the applicable fund earnings component of the transfer (the earnings on your UK fund that have accrued since you became a resident of Australia).

The timing matters (‘the 6-month rule’) when it comes to these tax implications. Here’s how, based on various situations, it might apply:

• “I have been an Australian resident for no more than six months.” The ATO explains that if you transfer your pension within six months of becoming an Australian resident, it should be tax-free.

• “I stopped being employed overseas less than six months ago.” The ATO also notes that your transfer should be tax-free if it is made within six months of your employment in the UK ceasing.

• “It has been more than six months since I became an Australian resident and/or since my foreign employment ended.” If you received the lump sum more than six months after gaining Australian residency or ceasing employment in the UK, and were an Australian resident when you received the payment, there may be tax implications.

Remember too, that the timing of when you can transfer your UK pension to Australia will depend on your age. You’ll usually need to be at least 55 to be eligible to transfer the funds, based on UK requirements.

What costs may apply if you transfer a UK pension to Australia?

The cost of transferring a UK pension to Australia will vary, depending on whether you decide to set up a self-managed super fund (SMSF), sign up with the Australian Expatriate Superannuation Fund (AESF) or decide to transfer your funds into a British or Australian bank account after you turn 55.

If your super fund is not a ROPS, your UK pension scheme may refuse to make the transfer, or you’ll have to pay at least 40% (potentially up to 55%) tax on the transfer.

Other associated fees might include the costs of setting up and maintaining a SMSF, or joining and becoming a member of AESF. If you are not a resident in Australia, your transfer will be subject to an overseas transfer charge of 25%.

As transferring your UK pension to Australia can be complex, you may want to consider seeking professional financial advice to assist in evaluating all of your options. If you’re now earning money in Australia, you may want to compare super funds to help ensure you’re with a great-value provider suited to your needs.

What costs apply if I transfer a UK pension to Australia and move again as an expat?

After transferring your UK pension to Australia, there might be further costs that apply, depending on your circumstances.

For example, you may also face a 25% tax on your transfer if you don’t live in the same country your ROPS is based in, such as if you move to New Zealand within five years of transferring your UK pension to an Australian ROPS.

With complexity in transferring a UK pension overseas to Australia and other countries, you may want to seek professional financial advice to assist you with your decision-making as an expat.

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