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The UK Budget & Your Pension Transfer to Australia

Have you transferred your UK Pension to Australia yet? The latest UK Budget may have just added another compelling reason to get the pension transfer process started as soon as possible…

The recent UK Budget introduces significant tax implications for UK pension holders, especially those considering a transfer to Australia. With the UK’s need to raise tax revenue, changes are targeting high-net-worth individuals, including through increased capital gains, inheritance, and stamp duty taxes. x, UK pensions will be included in an individual’s estate for Inheritance Tax (IHT) purposes, meaning pension funds may be subject to a hefty 40% tax upon transfer to beneficiaries. Previously, pensions passed tax-free to nominated beneficiaries; now, they’re set to fall within the IHT scope. These changes make Australian transfers particularly compelling, offering an escape from this potential tax burden and preserving wealth for yourself and future generations.

Why Pension Transfers to Australia Make Sense

For many UK expats in Australia, transferring their UK pension across made sense under the old rules, assuming their transfer value was sufficient and they met other important criteria. The incoming rules in the UK, however, offer an additional incentive to transfer a pension given the proposed tax changes. In Australia, pensions are not subjected to inheritance tax, but they will in the UK. This crucial difference allows UK expats to protect their pensions from significant tax liabilities while securing financial benefits for themselves and their families. Depending on the transfer value, bringing a UK pension to Australia could save thousands in tax and provide greater control over retirement income and estate planning. An Australian-based superannuation account not only reduces tax obligations but also offers greater peace of mind regarding family inheritance.

Income Tax Considerations for UK Pensions in Australia

As Australian residents, UK expats are taxed on global income, which includes UK pension drawdowns. This can be complex when considering that “tax-free lump sums” from UK pensions may still be subject to income tax in Australia. Transferring to an Australian superannuation account can reduce this tax exposure. Unlike UK pensions, Australian super funds are tax-exempt on withdrawals once retirement conditions are met, enabling retirees to enjoy their income without additional tax burdens. For UK expats, this is another compelling reason to consider an Australian transfer.

Passing on Your Pension: Benefits of Australian Pension Accounts

Australian pension accounts provide an advantageous framework for passing on retirement funds, especially when compared to the UK’s inheritance tax regime. Upon the account holder’s death, Australian pensions can typically be passed to a spouse or dependant children tax-free, ensuring financial security for loved ones. For non-dependants, a maximum tax rate of 17% may apply, a much lower rate than the UK’s 40% inheritance tax. With changes to business and agricultural reliefs also affecting asset preservation in the UK, expats seeking long-term financial security may find transferring assets to Australia essential for protecting family wealth. This favourable structure makes Australian pension accounts an attractive option for estate planning and wealth preservation, aligning well with the values of family support and legacy building.

Secure Your Financial Future with McKinley Plowman

The tax implications within the UK Budget mean it’s more essential than ever to evaluate your pension transfer options. McKinley Plowman’s UK Pensions team can help you assess these changes and determine the best course of action for your retirement funds. By transferring your pension, you could save significantly on taxes, protect your income in retirement, and ensure your legacy is preserved for your loved ones. Reach out to McKinley Plowman’s experts today to discuss your options. Contact us on (08) 9301 2200 or (08) 9325 2411, or visit our website to arrange a consultation.

written by:

Will Lyons

Will has 15 years industry experience working in both consultant and technical positions. Prior to becoming a qualified Financial Planner in Australia, Will worked as a pensions consultant in the UK gaining Advanced Diploma qualifications whilst working there. He has also attained an Advanced Diploma in Financial Planning and has completed the FASEA Financial Adviser Exam and Ethics qualification.

At McKinley Plowman, Will has progressed over the years from our UK Pensions Division all the way through to senior Financial Adviser and now Associate Director within the Wealth team – amassing invaluable experience and knowledge along the way.

Will is a keen cyclist and occasional triathlete that loves going out and socialising with friends.

Will is an Authorised Representative of Fortnum Private Wealth Ltd.