Can anyone let me know VERY SIMPLY!!!! the pros and cons of leaving pensions in the UK. I have 2 pension, both of which I only paid into for a few years before leaving the company. 1 is a teachers pension the other a private companies pension. Basically is it worth transferring them to Australia or I am better leaving them here? I know nothing of financial stuff so please, very simple answers!! Thanks Paula

I had a 4 year pension I was going to transfer but by the time fees etc. had been taken out it wasn't worth it so I've decided to leave it where it is. I'm of the impression from what I've seen that unless you have a more mature pension it's not worth it.

Hi
i am in the process of transferring my 27 y teacher pension to australia. I have been here 5y and am still teaching.

Reasons:
1) i am 55 and will go part time in january. i can access my pension and still work. If i leave it in the uk, it will be taxed at my marginal rate (30%). This includes my lump sum - which would have been tax-free had i stayed in the uk. (even if i wait until i retire, my pension and lump sum will still be taxed in australia).

2) When i transfer, i will have to pay 15% tax on the growth of my funds (since i arrived). Even so, the non-growth part (ie most of it!) can be accessed tax free in australia as a pension.

3) When i am 60 all the funds in australia are tax-free and i can withdraw a pension or a lump sum. All the investment earnings are tax free too.

4)in the uk, when i die, my wife continues to receive a pension,,,,,,,but it will be less than the usual 50% because I re-married recently. When she dies, it all disappears!!!!

On the other hand, When i transfer, all the funds are mine to invest as i see fit.
I can draw a pension equivalent to what my uk one would pay......and I am confident that my funds will last until I'm way past 100 (assuming average returns). If for some reason I dont make 100, the funds are there for my wife and my kids.

5) The exchange rate has moved against me since i arrived. 35p used to buy 1$. Now I have to pay 40p.........and it has been as high as 43p. The uncertainty of the future is a worry. Where will it be in 5y time?

This is just my personal assessment and i dont guarantee that all i say is accurate. This is what i THINK my situation is. I advise anyone in a similar position to get expert advice.

In the end.....do you exchange the security of an index-linked, government-guaranteed pension for a market dependent alternative?

Any advice would be gratefully received.

SCARY STUFF!!!

Hello again.
I got a bit carried away there.....and as your pensions are only a few years, then maybe my reply is not very helpful. Hopefully someone can make use of it though........?

Hi peeps

Paula, trust me. I am FAR more clueless than everyone else put together about the financial side of migrating to Oz. I haven't the faintest idea what to do about my mother's financial affairs, so she and I have agreed to shove them under the carpet until the New Year, when we will consult Alan Collett about the whole thing, privately and properly. We'll do whatever he advises, and personally I would prefer it if he deals with the Revenue for us.

What about your entitlements to UK State Pensions in due course? Because my mother is in her eighties, I've come across a couple of points about this.

When Mum is in Oz, they pay her a reduced UK State Pension. God knows how they justify that, since she is not eligible for a State Pension in Oz, but she says that this has always been the drill. I've heard that they freeze the reduced-rate State Pension as soon as they get Form P85, but I've no intention of doing anything with that until we have had Alan's advice. I think we might opt for Mum to remain ordinarily resident in the UK for tax-purposes in fact, but I'm not tax-savvy enough to be able to decide on my own.

However, they ponied up with the £500 Winter Heating Allowance the other day. Apparently the rationale for this (so their letter said) is because the "Qualifying Week" for this dosh was 18-24 September, and Mum happened to be in the UK that week. So I've hold her to stick to that dosh when it arrives in her bank account. We might arrange for her to be in the UK during the "qualifying week" next year and all, now that I have discovered this notion.

How does the UK State Pension system treat youngsters like you when you become old enough to qualify for it, do you know? My sister went to Oz when she was about 21/22 and never came back, so I doubt that she paid much into the State Pensions pot, because she didn't start work till she was 19 or so, but this query might be relevant to her too if either of you happen to know what the answer might be.

Thanks

Gill

Gill I have absolutly no clue what happens re pensions which is why I posted this thread. Surely I'm not the only person with a huge hole in their knowledge. I'm a typical female having gone part time after the kids we born and at the time that meant that I didn't automatically pay into teacher pension scheme at that time. I think the rules have changed now and part timer do pay into it. Basically I've not paid anything into a pension for 7 years!! All this talk of annuities and stuff leaves me confused. I really have NO CLUE!! My husbands pension with his old company was excellent - they paid in twice what he did which is unheard of and really the reason we did nothing about my pension as his was so good. It's more of a priority we sort his out cos there's a huge pile of cash in there. I believe if we don't get that sorted out 6 months after we arrive in Oz then we'll have to pay capital gains on it when we do transfer it. That's all I know!I'm drowning in my own ignorance!Paula

quote:

I'm drowning in my own ignorance!Paula

Me too. kid! Keep calm. Together we will get this sussed out.

Cheers

Gill

Paula (and Gill),

The tax situation if you transfer a UK pension to an Australian superannuation fund (as they are called) more than 6 months after you arrive isn't as bad as sometimes thought.

In brief, a tax liability can arise if you transfer UK pension benefits to an Australian super fund more than 6 months after you commence tax residency in Australia.

That liability arises under section 27CAA of the Income Tax Assessment Act 1936.

Section 27CAA taxes the increase in the fund value between the day before you commence Aussie tax residency and the day the fund benefits are received in Australia. The tax liability is usually paid by the super fund, and in that circumstance the increase in the fund value is taxable at 15%.

Hope this helps for starters.

If I've got it right I'll have to pay a tinsie bit of tax on the increase in value of my pensions between the day I become a tax resident in Australia and the day I transfer them to Oz. Unless that is, if I pull my finger out and get it sorted in the first 6 months I'm there.
As both my pensions are only a few thousand and they're increasing in value extremely slowly it's not really something I need to worry about for the time being.
Have I got it right????
We're better concentrating getting my hubbies pension over there as his is worth much more £000,000's, I think. So therefore it will grow more in real terms than my littlies.
Please tell me I'm right!!
Just have to find someone to sort it out for us. My uncle (Gill, not the uncle involved as my AOS) is an accountant so hopefully he'll know someone savvie with Aussie pensions to help us out. Paula

Hi Paula

Yes - your accountant uncle may be able to explain some of this in terms that you and I might be able to understand!

I think what I really need is an idiot-proof crib-sheet from Alan in the new year, simply saying, "Do the following things, in the following order....." I really am that hopeless with tax!

My sister's accountant in WA would doubtless be delighted to advise Mum, but my sister's accountant does not know anything about taxes in the UK - only the Australian stuff.

This is where Alan Collett really comes into his own, wearing his accountancy hat rather than his migation agent titfer. He knows about tax in both jurisdictions, which I think gives him a definite edge over my sister's lady, for instance. I think we risk being wrongly advised if we try to rely on an accountant who only knows how the Australian tax system works.

Obviously, with an elderly parent (and particularly my Mum, whose house has been let out for several years, but she lived in it for several years too) the main concern is the two capital taxes, being Inheritance Tax and Capital Gains Tax (possibly) in the UK. She or her Estate can be liable for both of those in the UK even if she is permanently resident in Oz. So for Mum, asking my sister's accountant really wouldn't be sufficient, because she would not know how to juggle between the taxt-regimes in both jurisdictions in order to produce the most tax-efficient solution for Mum.

However, I am in danger of hijacking your thread (please accept my apologies) so I will tiptoe quietly away from this thread now.

Still baffled by the whole thing!

Gill

D-OH. This is how hopeless I am. I as trying to reply to Gill using a quote but even that is beyond me and now it looks like I sent the last post not Gill. I really shouldn't be allowed out without an escort these days!!!!
Yes. I really do need a step by step crib sheet or flow chart (I like a good flow chart!!!LOL) to see me through this. Paula

quote:

Originally posted by Gill Palmer:
I think what I really need is an idiot-proof crib-sheet

G'day Gill

The problem with idiot proof is we've got much better at producing idiots than we are at producing crib sheets. The gap between the two is growing daily.

Cheers
Bob

Hi Guys,

Glad to see that we arent the only ones who are totally clueless when it comes to all matters financial!

While not in any danger of winning mastermind I dont think that we are complete idiots but as soon as someone starts talking about pensions they might as well be talking in Russian!

Did you ever get an idiot proof crib sheet? If so could you share the knowledge?

Hope you got your finances sorted out, our nightmare is just beginning!

Jo and Mike

You can also look into transfering them into a self managed trust, Suncorp do them.

Then if you have afamily trust you have access to your pension to use for investment purposes. Check this out with your accountant of course first.

This message has been edited. Last edited by: Alan Collett,

Hi all

Can another tax and pensions illiterate join in ??

A quick question for Alan, if I am going to Australia on a CP143, and have absolutely no intention of any gainful occupation, but the persuit of fish, will I be classed as a "tax resident" ?? If not will I be liable for tax on transfer of pension funds ?

One for Gill, I am going to try to find out what part of any pension is reduced on emigration, and will post any findings inm the near future.

Life is bad enough in England trying to work out our finances for the next 2 years, now my brain is overheating !!

If you intend to "reside" in Australia (buy/rent a house, own a car, maintain a bank account, join clubs or societies, etc) I think you can reasonably assume that you will be a tax resident of Australia from the date you arrive.

The term I often see used in connection with tax residency is "has a settled purpose" ...

In relation to the taxation of a UK source pension, you should be aware that if you have made any personal contributions to the pension fund from which your income is derived you should be able to claim what is called a tax deduction for what is called the Undeducted Purchase Price of the pension.

The annual deduction for the UPP is (broadly) equal to the total personal contributions paid on which you have not claimed a tax deduction in Australia, divided by your life expectancy (as determined by the Australian Government Actuary).

This deduction can have a fairly significant (and advantageous) effect on your Australian tax liability.

Best regards.

If you have been paying income tax under the FIF rules on the growth of your fund and then decide to transfer it to Australia, do you pay under 27CAA also (in effect double tax) or do you get a credit for the FIF tax already paid? Questions assumes that tax is paid by individual and not by Austarlian supernanuation fund.