Expats work and build savings in foreign countries and want easy access to their money when they retire.
Although these savings continue to grow, managing a pension fund from thousands of miles away in a different currency and time zone can be difficult.
Most expats in Australia come from the UK – but thousands of Australians have also worked in Britain and paid money into retirement funds.
Expats and former international workers have some choices about what to do with their UK pensions:
- Leave the money in the UK
- Switch the money to a UK SiPP with flexible access options
- Transfer the fund to an Australian superannuation scheme which is listed as a Qualifying Recognised Overseas Pension Scheme (QROPS) with HM Revenue and Customs (HMRC)
- Transfer the fund to a QROPS in another country
Switching to a QROPS means only transferring money to one of the schemes on the HMRC list.
Watch out for QROPS list pitfalls
The problem is the providers self-certify that they meet the conditions of being a QROPS and the responsibility of checking if they are compliant lies with the retirement saver. Get it wrong and a draconian 55% tax charge will be applied to the transferred money.
QROPS rules say the terms of the accepting pension should match those applied to UK pensions.
One super rule that causes a problem is paying out to anyone under 55 years old. Although this is standard for Australia supers, the measure is banned in a QROPS.
The only exception is retiring early for ill health.
Finding the right pension advice
Take pension advice from an experienced and qualified IFA. In Australia, the pension adviser must be regulated by the Australian Securities and Investment Commission (ASIC).
The IFA should benchmark how current pensions and investments are performing, discuss attitudes to risk and help set retirement goals.
Armed with that information, the IFA should then draw up a savings plan which include advice on if a pension should be transferred to a QROPS or not.
The exercise is personal – the IFA should customise a plan to fit the consumer’s circumstances and not try to shoehorn them into an inappropriate strategy that is outside of their comfort zone.