EXPERT ADVICE LEADING PROVIDERS FINANCIAL PLANNING GUIDE TO IN AUSTRALIA
CONTENTS INTRODUCTION...3 UK PENSIONS...4 BENEFITS...6 ABOUT...8 AUSTRALIAN...9 OFFSHORE TAX...10 ABOUT...11 CASE STUDY...12 FAQs...13 ADVICE...15 WHAT HAPPENS NEXT...16 CONTACT US...17
INTRODUCTION According to the World Bank it is estimated that between 4.5 and 5.5 million Britons now live abroad. That is around 8% of the UK population - a figure which is expected to increase. Due to this high level of emigration Her Majesty s Revenue and Customs (HMRC) have recognised the issues that exist for UK expats and have designed alternative options, such as. If you live abroad or are planning to do so in the near future transferring your pension to a (Qualifying Recognised Overseas Pension Scheme) could allow you the freedom and flexibility you need. offer independent advice and carefully analyse your pension and requirements before helping you make the most of your savings, so you can relax and enjoy the life abroad you ve always dreamed of. Our guide has been designed to highlight some of the many advantages available to you when you transfer your UK pension to a. If after reading this you have any further questions, please don t hesitate to get in touch with us using the contact details below. 3
UK PENSIONS Before we tell you about the benefits of transferring to a let s take a look at what to expect from your fund if you leave it in the UK: You will pay 45% in tax, or higher if you have a large fund, depending on the UK Government s income tax rates. Your monthly payments will be paid in Sterling which would affect your purchasing power due to currency fluctuations (see page 7 for more details). You can only take up to 25% of the fund as a pension commencment lump sum (formerly known as tax free cash). If you decide to take advantage of the new pension freedoms and take your fund as a lump sum you will have to pay UK income tax at your highest marginal rate which could be up to 45%. The new pension freedoms are only available to certain types of scheme. 4
UK PENSIONS If you have a small fund ( 30,000, for example) you could end up paying 40% of that in tax, which would leave you with just 18,000. Therefore 12,000 would go back to Her Majesty s Revenue and Customs (HMRC). If you die after the age of 75 all proceeds will go to your beneficiaries. They will be taxed at their marginal rate of tax, which could be as high as 45%. If you die before age 75 it is tax free. When it comes to the range of investment options you are more restricted. Unless you suffer from ill health, you can only take benefits from age 55. If you fall ill the trustees may be able to grant earlier payment of benefit, subject to their discretion. 5
BENEFITS You can take a lump sum of up to 30%, tax free at source You can receive your pension benefits in the currency of your choice You can take income from your pension in a more tax efficient way You don t need to purchase an annuity or pay a UK tax charge upon death There is no UK tax to pay upon death so all of your money goes to your loved ones There is potential protection of the fund from any creditors or in the case of a divorce If you have a fund over 1million there is no lifetime allowance tax charge which is 55% in the UK on anything over 1million 6
BENEFITS Currency Fluctuations Another benefit of transferring your UK pension to a is that of currency fluctuations and the effect that they have on your purchasing power. The graph below shows the movements of n Dollar rates over the last ten years. It also highlights the benefit of having any income paid in the currency of where you are resident. The n Dollar - AUD per 1 GBP At its highest rate the n Dollar was $2.52 and at its lowest rate was $1.44. On the assumption of an income from a pension of 1000 per month. That would mean AUD $694 at its highest but AUD $396 at its lowest - a difference of 57%. 3.0 2.5 2.0 1.5 1.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 7
ABOUT Launched in April 2006, were designed to enable British expats to move their pension pots to an overseas jurisdiction where they could enjoy minimal or even zero tax rates, greater income potential and increased financial freedom. are pension schemes based outside the UK which are recognised by HMRC and regulated as a pension scheme in the jurisdiction in which it was established. Prior to the introduction of if you wanted to transfer your pension from the UK it would have to have been to the country where you live. However with a you can now use one of over 45 financial jurisdictions. As a resident of both n and offshore in jurisdictions such as Malta and Gibraltar are possible. In many circumstances planning your retirement by using a combination of retirement in different jurisidictions can be advantageous. To be eligible for a you must be aged 18 or over and hold a UK private pension. It s not possible to transfer a state pension to a, nor can you transfer if you have already taken an annuity. Before switching to a we recommend that you check HMRC s online list of approved by visiting: www.hmrc.gov.uk/pensionschemes/qrops.pdf 8
AUSTRALIAN Transfers to an n Superannuation scheme can be accepted as long as the member is under the age of 65. work test. Transfers (including the growth component) does not exceed the concessional contributions cap of AUD 540,000 every 3 years. Any growth (increase in value of the UK fund since becoming n tax resident) is treated as income of the n and would be taxed at 15%. However if the transfer is complete within 6 months of becoming n tax resident the growth is taxed at 0%. Take up to 30% as tax free lump sum. Offers third party allowing investors to live anywhere they choose. Payments from an n are tax free if aged over 60 and retired. Tax free distribution on death to dependents. 9
TAXATION OF OFFSHORE 30% tax free lump sum distribution if paid within 6 months of becoming n tax resident. If lump sum distributions made after 6 months then marginal rates of tax paid on the growth element. i.e. the difference between the transfer value and the new value. No income tax for temporary residents and non-residents No tax on growth of the fund inside the offshore that satisfies the definition of a foreign superannuation scheme for n tax purposes. 10
ABOUT The jurisdictions of Malta and Gibraltar have plenty to offer the holder. These tables show you their main advantages: MALTA EU member Enjoys double taxation treaties with many leading nations Former member of the Commonwealth and and legal system run on British lines Regulated by the Malta Financial Services Authority Offers 0% inheritance tax Take up to 30% as tax free lump sum GIBRALTAR British overseas territory EU member by association centre Regulated by the Gibraltar Financial Services Commission (FSC) Flexible administration Structure similar to the UK Fully compliant with the UK s rules and regulations Offers third party allowing investors to live anywhere they choose Offers third party allowing investors to live anywhere they choose 11
CASE STUDY Peter and his wife June have been living in for the past 10 years. Peter has a pension fund of 500,000 and is now 55 and wants to draw a lump sum from his pension. Peter has now transferred his UK pension scheme to a number of in Gibraltar each holding 540,000 AUD. Peter is now able to withdraw 30% of the fund as a tax free lump sum which enables him to buy their new home. At this point Peter does not require income from his pension and so leaves the invested to grow. As the Gibraltar is also classed as a foreign superannuation scheme in then the growth on the fund is exempt from tax. Had Peter moved all his fund to already then the growth on the fund after transfer would be taxed at 15%. Now aged 65 Peter wishes to retire and start taking income from his. A local n Superannuation scheme is established that qualifies as a by HMRC and one of the offshore is transferred to the local scheme. The income from the scheme is tax free to Peter. Peter knows he is able to transfer up to 540,000 AUD every 3 years. Sadly now aged 75 Peter s wife June passes away. June s small pension passes to Peter without deduction of tax. However Peter would now prefer to be closer to family in the UK and decides to return home. As the bulk of Peter s money is in an offshore in Gibraltar Peter can move his pension back to a SIPP in the UK or continue to take income from the scheme but pay UK income tax. Whats more the fund still continues to grow tax free. Had Peter moved his fund in whole to an n then a tax charge of 38% would be due on the taxable part of the fund on transfer out of the scheme. 12
FAQs What is the minimum amount of funds I can transfer to a? We recommend that your pension pot has at least 50,000 in order to take full advantage of status. How old do I need to be to apply for a? You can apply for a if you are between ages of 18 and 75. I live in the UK. Can I apply for a? You can, although it is highly likely that a will not be suitable for you. Yes, final salary schemes offer a high level of guaranteed benefits, are usually index linked and provide death benefits for widows and widowers. However they are very rigid in their structure, as such there are a number of advantages in moving to a. But it is important to ensure a like for like comparison is carried out to compare the two options. Can I transfer State Pension Scheme? No a are for private pension arrangements only. I have bought an annuity with an Insurance Company; can I still transfer to a? No, you must transfer to a before you buy an annuity. 13
FAQs Will I need to take out an annuity? It s not crucial but taking out an annuity does have a number of tax advantages. Can I take 100% of fund as a cash lump sum? You can take all of your fund as cash but you will pay tax according to the country you live in. Most schemes we recommend offer a minimal rate of tax. Could I be unsuitable for a transfer? If you have guaranteed annuity rates on your personal pension plan then this may not make a transfer suitable. It is also highly unlikely that a will be suitable for UK residents. Would I be able to organise a transfer self? No, Trustees will only accept a transfer through their appointed qualified intermediaries. 14
ADVICE Here at we pride ourselves on offering our customers the highest quality service. That s why we always recommend to anyone considering a transfer that they seek independent financial advice before making a final decision. Your pension may be the most valuable asset you own so make sure you protect it by doing as much research into the advantages and disadvantages of a as possible before signing on the dotted line. Our friendly, professional team of staff are here to answer any further questions you may have about after reading this guide. Simply call us on the phone number below or feel free to send us an email at the below address and a member of our team will get back to you shortly to discuss your options. 15
WHAT HAPPENS NEXT Once you have contacted us we will start the application process by following these three simple steps: STEP 1 STEP 2 STEP 3 We gather all the necessary information on your pension arrangements whilst gaining an understanding of what your plans are for retirement and how having a could affect your personal circumstances. We compare all the advantages and disadvantages of transferring your pension to a. If we do not think you are suitable for a we will inform you that the application process has ended and explain how we have reached our decision in a report written in plain English. If we think it is best that you leave your pension in the UK, there is no cost at all for our service. If you choose to switch to a, we will arrange the transfer for you. All our fees are paid by the new arrangement so there is no need to write us a cheque. 16
CONTACT US The Chislehurst Business Centre 1 Bromley Lane, Chislehurst Kent. BR7 6LH enquiries@-.com Tel: 00 44 20 3667 4615 Centro de Negocios NuevoAndasol, Urbanización Andasol, Carretera Cádiz-Málaga KM 189, 29604 Marbella, España 125 Park Avenue, Suite 2507, New York. NY 10017 enquiries@us-.com Tel: (+1) (678) 701-3541 Suite 12, 8 Davallia Road, Duncraig Western. WA 6023 enquiries@qropsinaustralia.com Tel: (08) 6102 5067 14