According to generally available information, UK expats here cannot transfer a state-sponsored fund any longer, and cannot normally withdraw money from a non-state pension fund before 55, without paying 55 per cent tax. After age 55, you can withdraw 25 per cent tax free in the UK, provided you are UK tax resident but, yes, it is taxable here.
The remainder can be transferred as a lump sum to Australia providing it goes into a QROPS fund, of which there is only one such public fund – Adelaide-based Tidswell Financial Services, an Australian Financial Services Licensee and superannuation trustee.
However, I note that the Australian Securities and Investments Commission recently launched action in the Federal Court against Tidwell over alleged misleading advertising concerning its start-up fund mobiSuper. Tidswell says it will vigorously defend the action.
New immigrants are given only six months to transfer their pension assets without Australian tax. After that, any growth in the pension fund since you became a resident here are titled “applicable fund earnings” (AFE) and are taxed as personal income.
They can be directed into your super fund and taxed 15 per cent as fund income, providing you transfer the entire fund. Montford points out that, with Woodford frozen, you cannot do that.
I noted previously, that if you direct your AFE into your super fund it is subject to the concessional cap of $25,000 but this is incorrect.
However, if you were to direct the balance of your fund into super it is considered a non-concessional contribution (NCC) and subject to the NCC cap of $100,000 a year, or a three year roll-up of $300,000, which you can use while under 65, even if retired.
My husband and I moved from the UK to Australia 12 years ago but I left a Free Standing Additional Voluntary Contributions (FSAVC) scheme in the UK. I am now 57 and have been advised by the FSAVC provider that I can now access the money – £50,000 – either by an annual lifetime payment of £1500, or as a lump sum. I prefer a lump sum but have been advised by the provider they will deduct 45 per cent tax. What is the most tax-efficient way of withdrawing the funds? Am I able to claim the tax back from HM Revenue & Customs (HMR&C) as I am not a UK taxpayer, nor am I an ordinarily resident there? In Australia, my income is taxed at the highest rate. However, when I retire in the next year or two, I would not expect to pay Australian income tax, as my income will be beneath the minimum tax threshold. G.M.
In Australia, a FSAVC would be called a standard accumulation super fund, or defined-contribution fund. They were introduced in the UK to allow employees to save in another fund as well as their employer’s defined-benefit fund – a type which is still commonly offered by UK employers though increasingly phased out in Australia.
According to Montfort, lump-sum payments from UK pension plans are not subject to the double taxation agreement between the UK and Australia and are taxed in the UK. Initially, this is based on assumed further UK income – and so is high – but you will be able to reclaim some back.
Assuming no other UK taxable income in this tax year on a £50,000 lump sum, UK tax would be 15 per cent (£7,500).
In Australia, the lump sum would be subject to Division 305B of ITAA 1997, and the growth from the date of arrival to Australia would be assessed for Australian tax at your marginal tax e.g. if your pension fund was £30,000 12 years ago, the £20,000 “applicable fund earnings” will be taxed as income here unless contributed to a super fund, as noted above.
Since you expect no taxable Australian income in retirement, perhaps you should wait until then.
I’m in my late 40s, an Australian citizen and brought my small National Health Service (NHS) pension from the UK to super fund HESTA, which was a QROPS at the time. They signed the papers in September, 2014, and the funds arrived in the HESTA account on April 28, 2015. I’ve gone to see if I can transfer to another low-fee super fund and found HESTA is not a QROPS and am concerned as to what I can do. T.E.
A pre-2015 transfer into a QROPS is still caught by the 2015 rule change instituting a penalty of up to 55 per cent tax if moved out of the QROPS fund within five years.
I understand that funds, such as HESTA, are still required to report movements out of the fund for a 10 year period, even if they have ceased to be a QROPS.
Remember that all your super benefits are preserved until retirement after age 60 or on reaching 65 if still working.
HESTA points out that, if you withdraw the money, it must report this to HMR&C, which will assess the tax, unless the money is transferred to a QROPS. HESTA has no say in the matter.
HESTA as an above-average industry fund and you could reduce your stress by simply leaving the money there until retirement.
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.