When it comes to determining the best approach to handling UK pensions and whether they should be transferred to Australia, Jason O’Connell, general manager of UK pension planning at Shartru Wealth, said it’s going to boil down to the individual’s circumstances.
“You need to have a look at what assets and income streams are in place to support retirement and how they all link together. You need to establish whether transferring a foreign superannuation [amount] such as a UK pension to Australia is the right step,” explained Mr O’Connell.
“I think it’s all about identifying how it could potentially make a meaningful difference. There are a number of ways in which it could benefit the client, including taxation and mitigating currency risk, which can sometimes have a huge impact on retirement outcome. There also be a need to align investment strategies to complement the overall retirement planning strategy.”
Mr O’Connell pointed out that it is not always a simple binary decision about whether a pension should be transferred and that it’s important for advisers and their clients to consider a range of strategies.
“While there are some challenges with the Australian superannuation system in terms of the limitations with the caps, it can also offer some fantastic opportunities,” he noted.
“Often what we find is that there’s no right or wrong way to transferring; it can be a hybrid approach, which looks at what is the right value to transfer and what will complement a UK drawdown strategy to achieve the best outcome?”
For clients with personal pensions, there’s also the UK state pension to consider.
“The UK state pension is an income source that’s assessable for tax. There are some ways to enhance that pension income in retirement, so it’s fixed income. It’s a contributory based system in the UK, so quite different to Australia. That can have a big bearing on the different types of income streams and whether you want to be paying income tax on your UK pension or whether you prefer to have it in Australia to draw it down,” he noted.
Mr O’Connell stated that there is a significant market for this kind of advice.
“It’s not just UK expats either, I also have lots of returning Australians as well, as well as Irish, French and German clients who previously lived and worked in the UK and who’ve all come to Australia,” he said.
“In Australia, there’s over a million people with British passports, and so that’s quite a large target market when you think of people who have got advice need.”
