UK and Foreign Pension Transfers
Foreign pension fund transfers to Australia.
Background
Members of foreign pension or superannuation funds can transfer their entitlements to Australian superannuation funds subject to the laws of governing the foreign funds.
In particular, Members of United Kingdom (UK) pension funds who become Australian residents can transfer their UK pension equities to Australian superannuation funds which are registered as Qualifying Recognised Overseas Pension Schemes (QROPS). Since 2015, few major Australian superannuation funds have been QROPSs as the hardship provisions in such funds breach the UK requirement that funds should not be accessible except on retirement, ill health or death. A small number of Australian public offer funds limited to members age 55 or more have been specially established to become QROPSs.
The increase in value of the member’s equity in the foreign scheme between the date of Australian residency and the transfer of funds to Australia is defined as the Applicable Fund Earnings (AFE) and is normally included in taxable income and taxed at marginal rates. If however, an election is made under Section 305-70 of the Income Tax Assessment Act 1997 to transfer the AFE to a superannuation fund, the entire AFE must be transferred and the member pays no tax and the receiving superannuation fund pays tax of 15% of the AFE.
Foreign funds generally determine transfer values at the time of transfer of funds to Australia, but not at the time of Australian residency. People transferring funds to Australia therefore need a calculation of the transfer value that would have applied at the time of Australian residency.
Service
The practice’s service in this area is normally provided to accountants, financial planners and individual seeking to transfer funds. The service comprises the certification of the value of pension entitlements at the time of Australian residency.
Benefits
The primary benefit of actuarial advice is the authority provided by an independent expert valuation of the member’s interest at the residency date.
Experience
The practice has been involved in the valuation of individuals’ entitlements in superannuation schemes of various types since its 1980 inception, and those of UK and other foreign pensioners since 2007.
Methodology
Generally, the practice’s methodology involves the finding a set of assumptions which accurately value Cash Equivalent Transfer Values (CETVs), known at leaving employment and / or a recent illustrative CETV. These assumptions, or a blend of them if there are two known CETVs, are used to estimate the CETV at Australian residency.
Information needs
The information that the practice usually needs to certify these values is generally contained in the subject pension fund’s letter offering the final transfer value.
Fees
The practice charges a fixed fee of $1,500 including GST to perform these valuations.
Online request
A form to request a certificate is available here.