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Complex rules surround transfer of UK pension funds

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Once you withdraw your 25 per cent that is untaxed in the UK, the April 2015 UK changes allow you to leave the money in your current pension fund and take out lump sums when you need to: known as “uncrystallised funds pension lump sums”.

The 50 per cent emergency tax rate should not apply after 55 but you would need UK advice on that as I am not a UK licensed adviser.

The website, uk.gov.au, lists more than 1000 Australian QROPS funds – most of them self-managed super funds (SMSFs), so it would appear that the preferred method of transfer in the past has been to set up one’s own fund.

However, it is not known how many of these meet the more restrictive rules brought in from 2014 that don’t allow withdrawals until age 55 – and even more rules from 2017 introducing a 25 per cent “overseas transfer charge,” unless both the individual and the QROPs are both resident in Australia, and remain so for five UK tax years.

The Australian British Chamber of Commerce notes the existence of a public offer QROPS, the Australian Expatriate Super Fund (AESP) but its link directs you to a firm of advisers: IVCM.

AESP is a division of the Tidswell Superannuation Master Plan (as are Spaceship and mobiSuper funds), Tidswell being an Adelaide firm of advisers and is itself part of a larger group: Sargon.

You can download a copy of the product disclosure statement from the Sargon website and a separate application form. The fees appear quite high, totalling 2.46 per cent a year for the sample Balanced Fund quoted.

Why not simply leave the money as is and take a pension at retirement?

I have been retired for about six years and have a super pension with Colonial First State, containing about $230,000, plus $80,000 outside of super. My query is to do with advisor fees that bug me, well over $2,500 per year. I’ve seen the AustralianSuper TV ads and they insist on low fees. Is it possible to transfer my income stream into AustralianSuper, or is there another option you can suggest? B.E.

The firm of advisers you name is part of the IOOF group and their fees are independent of the Colonial First State pension fund.

If all your investments are being managed by the firm you are being charged about 0.8 per cent a year, which is not exceptionally high.

You could move to another super fund but that would not solve the question of adviser’s fees, if in fact you were to stay with that firm and possibly even ask them to move your fund for you or even switch to another advisory firm.

I suggest you need to decide whether (a) you need to pay ongoing fees to an adviser and, if so, (b) whether you are happy with the advice you are receiving or (c) you want to switch to another firm of advisers.

If I rent out a self-contained flat incorporated in my home, and I continue to reside at the same address, would the property still be considered my principle place of residence? Would it affect my children when sold by them on my death? J.C.

When you earn income from your home, it loses its 100 per cent exemption from capital gains tax (CGT). So, when your children sell the house, CGT will be calculated in proportion to the area of the flat and the length of time it was rented. For example, let’s suppose (i) you own the house for 30 years and rent the flat for 10 of those years, (ii) the flat constitutes 20 per cent of the floor space and (iii) when sold, the house makes a $600,000 profit.

Most of the profit will be CGT-free but the taxable portion will be calculated by multiplying $600,000 by 10/30ths and then 20/100ths, equalling $40,000 and this would be taxed in the deceased estate at adult rates – currently about $4500, if no other income.

When renting, be sure to keep receipts for all items bought for the house that would be deductible if it was a rented property, as these can be added to your cost base.

I am an 88-year-old widow, part pensioner with no super, own my home and have some shares and term deposits. I have just closed a $220,000 term deposit as the rates are so low. The money is now in my bank account while I decide what to do with it – probably more shares, as I am looking for more income. Any suggestions? J.W.

If you are accustomed to a share portfolio and know how to pick one that meets your needs, or have a broker whom you can ask, then by all means, look to improve the income earned on your money.

However, I am wary about the sharemarket right now, given the economic problems being experienced in Europe and America, and you could find yourself caught up in a market selloff.

Why not take a three-month term deposit and see what is happening at the end of the term?

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Australian Financial Complaints Authority, 1800 931 678; Centrelink pensions 13 23 00.

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