How to transfer a UK pension to your Australian super fund

For decades, Aussies have called the UK home to discover Europe, while British expats have swapped its cooler climate for our sun and surf. So, how can you transfer money from a UK pension to an Australian super fund?

If you’ve ever lived and worked in the UK for any period of time, you will likely have accrued savings in a UK pension. And if you’ve moved to Australia – either for the first time or as a returning resident – you may want to access this money for your retirement savings. In this article, we cover:

Am I eligible to transfer my UK pension to my super?

If you are considering transferring a UK pension to Australia, eligibility requirements apply under both Australian and UK law. You generally need to be 55 or older to transfer your UK pension to Australia, and you can only transfer a UK pension into an Australian scheme that is registered as a Recognised Overseas Pension Scheme (ROPS). 

Australian requirements

You may be eligible to transfer your UK pension to an Australian super fund, depending on your circumstances. However, the Australian Taxation Office (ATO) says there are certain conditions that must be met before your Australian super fund can accept your UK pension funds:

  • Age limits – you must be under 75 years old at the time you transfer the money across, otherwise your Australian fund can’t accept it. 65 to 74-year-olds need to meet the Australian ‘work test’, working at least 40 hours within 30 consecutive days in a financial year. However, your fund can accept the contribution if you are 55 to 64, even if you aren’t working.
  • You must provide your Australian super fund with your tax file number, either before making the transfer or within 30 days afterwards. If you don’t do this, the ATO warns, your super fund will have to return the money to your UK fund.
  • Fund-capped contribution limits apply, which will vary based on your age and non-concessional (after-tax) contributions cap for the financial year.

According to the ATO, you’ll need to pay income tax on the ‘applicable fund earnings component’ of any foreign fund transfer. Generally speaking, this refers to any profit your UK pension money accrues after you move to Australia. However, the ATO says you don’t have to pay tax on this money if you transfer it to your Australian fund within six months of either becoming a resident of Australia or leaving your job in the UK.

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

UK requirements

Her Majesty’s Revenue and Customs (HMRC) – the ATO’s counterpart in the UK – sets requirements for transferring funds from UK to non-UK funds, including Australian superannuation 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.

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 a QROPS (now known as a ‘ROPS’), your UK pension scheme may refuse to make the transfer, or you’ll have to pay at least 40% tax on the transfer. Other UK Government sources estimate tax charges may even go higher – up to 55% for the individual, and 15% for the scheme administrators – if you don’t use a QROPS/ROPS. Additionally, the UK Government is clear that it’s up to you to check with your fund if it is 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 age 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, which provides advice on ROPS in Australia and elsewhere, you can transfer certain types of UK pensions to Australian registered QROPS (now ROPS).

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

  1. An Occupational Pension Scheme
  2. A Defined Benefit Scheme (i.e. A Final Salary Scheme). It is 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 an 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 amounts. 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 main options:

Using an SMSF

Because the rules of an SMSF are set by the trustee(s) – who are also members of the fund – they are 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.

Source: ATO

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 – ATO data released in 2020 found that the average annual costs of running an SMSF were almost $15,000 in 2017/18.

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 the SMSF. 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. 

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 QROPS 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 fees may apply, such as initial set-up fees, transfer fees, and investment management/administration fees. You can contact the AESF and read the 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 Pension Wise website advises that while the first 25% will likely be tax-free, and 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.

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, which means:

  • If you are under the age of 65, you can transfer up to $300,000 plus fund earnings (investment growth) to Australia, without being liable for an additional tax charge, by using the bring-forward rule.
  • If you are aged 65, you can transfer up to $100,000 plus fund earnings (investment growth) to Australia, without being liable for an additional tax charge. 

At the time of writing, amendments to the bring-forward rule were being considered as part of a bill before the Australian Senate. The proposed changes would see the people aged 65 and 66 become eligible to make use of the rule. Canstar has a related article that explains concessional and non-concessional contributions.

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).

Timing matters. Here’s how, based on various situations that might apply:

  1. “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.
  2. “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 terminating.
  3. “It has been more than six months since I became an Australian resident and/or since my foreign employment was terminated.” 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 QROPS (now known as a ‘ROPS’), your UK pension scheme may refuse to make the transfer, or you’ll have to pay at least 40% tax on the transfer. Other UK Government sources estimate tax charges may skyrocket to up to 55% for the individual, and 15% on the scheme administrators.  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.

If you’re comparing Superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for Australians aged 30-39 with a balance of up to $55,000, sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Use Canstar’s superannuation comparison selector to view a wider range of super funds.