Have you left your UK pension home alone?

 In UK Pensions News

Sometimes it can be quite confusing being a UK expat living permanently in Australia. Do you follow AFL or NRL? Are you still allowed to call it football or must it be soccer? Is Vegemite actually better than Marmite? Will this darn sunshine never end?

One confusing aspect of life “Down under” that is not as lighthearted as the above issues is what to do if you have left your UK pension benefits at home. The decision around what to do with what is frequently your second most valuable asset (after your home) is confusing and can often lead to serious financial mistakes being made.

Importantly, you will have to follow two Budgets each year to see how you may or may not have been affected. Two? When was the last time you even paid anything more than scant attention to one?

If you have UK pension funds and:

  • Are aged over 55 the Australian Federal budget may have affected you
  • Are aged under 55 last Thursday’s UK Spring budget did affect you.

For over 55’s

If you have UK pension funds valued at or over around £220,000 (depending on exchange rates) you will not be able to bring your pension over to Australia in one tax year.

This is because a UK pension transfer to Australia is not counted as a transfer or rollover of existing benefits, but is in fact classed as a non-concessional contribution. This means you are limited to $300,000 in any three year period, as long as you are under age 65, with the balance having to remain in the UK. We can advise and manage the entire strategy without having to include extra, expensive layers of fees by using a UK adviser.

Why consider a transfer?

  • Current defined benefit schemes are providing historically high Cash Equivalent Transfer Values (CETV)
  • Tax free income in retirement (subject to new and existing rules)
  • Advantageous tax and death benefit position
  • Uncertainty surrounding BREXIT
  • Access to local advice and fee structures

For under 55s

The UK Spring budget introduced an unexpected and immediate tax charge of 25% of your fund value if you transfer your UK pension fund to a jurisdiction that you are not a tax resident in. Many under 55s were being advised, for some valid reasons (and some not so), to transfer their funds out of the UK into a QROPS in alternative tax regimes such as Gibraltar, Malta or New Zealand.

This can no longer be a valid option except in a few isolated circumstances. If you are in the process of doing this STOP now!

If I cannot transfer to Australia or to a QROPs do I need to do anything with my fund? Yes, you definitely should.

If you have a defined benefit scheme entitlement you probably have access to a historically high CETV and you can still take advantage of this. (Once properly analysed). This could lock in these values now for your own future.

Why consider a transfer?

  • Current defined benefit schemes are providing historically high Cash Equivalent Transfer Values (CETV)
  • Access to modern investment portfolio structures and performance
  • Avoid highly charged pension contracts
  • Consolidate numerous funds to one clear fee structure
  • Remove poor death benefit entitlements
  • Uncertainty surrounding BREXIT
  • Access to local, regular advice

The UK pension arena is one of the most mature and complex trust environments on the planet and just as an Australian based financial adviser will make recommendations regarding super rollovers to one appropriate Super fund; the same applies to your UK pensions. You need to review your funds to ensure they are working in your best interests and are not heavily charged and/or have consistently poor investment returns.

The very least you need is a free review of your particular situation.

Is there help at hand? 

Funny you should ask…I was rather hoping you would.

Since arriving in Australia I’ve been on a kind of personal crusade to fill the void of properly qualified and experienced advice to those with UK Pension funds.

The absolute minimum qualification a UK based adviser must have to deal with pension transfers is the CII Diploma and G60 or AF3. We hold these qualifications but they are not truly sufficient to demonstrate real proficiency in this field of advice.

As an ASIC regulated adviser with UK Chartered status and Certified Financial Planner status in both the UK and Australia, Harding Wealth Management is ideally placed to explain your situation and options to you in a knowledgeable, qualified way. We have access to UK FCA regulated advice and deliver a complete solution to anyone who is in this confusing position of having a UK pension.

Two budgets? I don’t think so!

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