Can anyone answer this question for me? I am lucky enough to have an index-linked defined benefits pension with a tax free lump sum. I am planning to move permanently to Australia next year, once I retire. I understand that if I leave my pension in the UK it will be taxed in the UK. However one of these threads implied that the lump sum would be taxed in Australia even though it is tax free in the UK. Is this true and is there anything I can do to prevent it apart from transferring my whole pension?

Yes your tax free lump sum will be taxed in Australia but all is not lost. When you arrive in Australia one of the first things you need to do is get a valuation of your pension fund as at the date you arrive in Oz as well as an assessment of the tax free lump sum that would have been payable at that point.

This amount is effectively tax free in Australia as they cannot tax you on something that accrued to you before you arrived into the Oz tax system.

Having said that I would seriously consider moving all of your pension into an OZ super fund because of the great benefits to be derived. Once you are 60 any pension paid to you by your super will be tax free in Australia. If you take the lump sum and then allow your pension to be paid from the UK the that pension will be taxable no matter what your
age.

If your pension fund is large then consider setting up a self managed fund.

I should have mentioned that if you are going to move your pension then you need to do it within 6 months of your arrival in Oz for it to move tax free. It will also mean not taking the lump sum or letting your pension start in the UK as that will trigger a move of your fund into annuity - a black hole from which there is no return for your money.

I know that your pension will be index linked but you will need to weigh up that benefit against having your pension tax free and the possibility that there will be a lump sum left to your family when you and you wife die which you won't get from an annuity.

Your pension is an issue that is well worth taking some professional advice on.

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Thank you-I will certainly need to get professional advice, as you say.I had thought that i could just take the lump sum and add it to my other funds (savings, sale of property etc)and move the whole lot tax free to Australia. My only concern about transferring my pension is that superannuation rates are very poor at the moment-though of course so is the exchange rate!

Also, if i did transfer the whole pension, would there be limitations on the lump sum I could withdraw and would I be able to draw an income straight away or would I have to wait? Thanks again..more complicated than I realised!

If you take your lump sum before your move to Oz then yes it would be tax free in Australia along with all your other assets. Your ongoing monthly pension would be taxable once you arrive in Oz. If you have shares or life policies you should check elsewhere in this forum for items dealing with those assets especially the FIF rules.

If you transferred all of your pension into an Oz self managed super fund and you were at least 60 years of age and retired you could elect to take a lump sum from your super pension which would be tax free. Once 60 and retired you have no upper limit on the pension that you can take tax free in any year there are only limits on the minimum that you can take.

The annual minimum starts out at 4 % and escalates based on your age. For this year the minimum has been reduced to 2% recognising that pensioners shouldn't have to force sell assets in a down market to meet minimum pensions if they don't need the money. Personally I would like to see this government do away with minimum pension requirements entirely and allow people to manage their assets as they see fit. This argument has been raised by pensioner groups in Oz.

Again pensions are worth getting right the first time of asking so do your research on the internet re Oz super funds and get some professional help to arrive at your final decisions.

Sorry I didn't cover getting an income straight away.

I can advise you that you can transfer money into your super fund and commence a pension on the same day.

In fact I would recommend doing this as all the assets transfer to pension mode and any income generated by them become tax free as well as the pension that you will draw.

You declare the pension that you require and then wait till your assets generate enough income for you to take your pension. If you take a lump sum up front or take your annual pension straight away you will be reducing the earning capacity of your assets.

Remember that pension assets within a super earn income or dividends tax free - even bank interest is tax free so why have income generating assets outside you pension producing taxable income if you don't need to use them.

Get the advice!!

Paddy-Thank you hugely for your really valuable advice-it has answered all my immediate questions. I am now much more inclined to consider a pension transfer than I was-and I will definitely get that professional advice!

Just one more question-last one, I promise! I'm planning to move out as soon as I'm 60 and intend to work but not immediately. Could I transfer my pension before I get a paid job?-the net advice seems to gloss over this point

Yes you can and you can certainly take a job once your pension/super is set up.

If you want to get advice contact Alan Collett as he is a qualified UK and Oz accountant and I remember him saying that he runs his own self managed super fund and that he got it qualified as a qrops approved scheme - so he should know all the ins and outs you will need to address.

OK-thanks. I will contact Alan for an appointment
Regards-freddie

Freddie -

One question that hasn't been raised in this thread is what sort of visa are you proposing to get to enable you to come to Australia?

If you intend to get a Retirement visa, then that will be the 405 Investor Retirement visa, which only gives you Temporary Residence (albeit for as long as you want to live here - permanently if you want).

If you are coming on a Parent visa, then it would give you Permanent Residence.

The very significant difference is that Temporary Residence gives you a very great tax advantage in that only your Australian income would be taxed in Australia, and your other income (including any income which you took in the UK from your pension) is taxable in the country of source (UK in this case).

This means that you can get the tax-free allowances and the benefits of the lower bands of taxation in both countries - and believe me, that can amount to a very substantial saving in the overall amount of tax that you would pay, particularly if you are in or close to the 40% tax band in the UK.

Some people will tell you that there are moves to obtain Permanent Residence for holders of Retirement Visas - and that of course would remove the tax benefit I have described - but my personal belief is that it will never happen in the foreseeable future (almost certainly never for 405 visa holders, even if it does eventually happen for the old 410 Retirement visa - and I personally doubt even that).

Thank you for your advice. I will be on a contributory parent visa 143-which is permanent. The tax situation seems to get more and more complicated so I am going to get some specialist advice-with my pension, that seems to now be complicated by the fact that I am still in my pension scheme and plan to be until I am 60 which could hamper plans to transfer out-nothing is straighforward it appears!