Words, Evelyn Duffy 

Hundreds of British families move to booming Western Australia each month, bringing plans for adventure, prosperity and a ‘sunnier and more relaxed way’ of life.

While the holiday is one of sun, surf and celebration, settling permanently, particularly for those who have no social, work or professional networks brings challenges people often overlook. One of those challenges involves transferring the family nest egg, particularly the pension many have contributed to during their working lives in Britain.

They say there’s nothing surer than death and taxes, however the amount of tax one pays in transferring the family nest egg to Australia can depend on the quality of advice one receives. In fact, the growing wave of British immigrants flowing into Western Australia brings a tide of concerns about the safe transfer of pension funds.

Those who don’t obtain the right advice risk long delays in transferring an important asset or paying too much in transfer fees and/or taxes.

Among the British migrants to express concerns about bringing pension assets to Australia are Morley couple Gareth Thomas and partner Debra Rogers. Gareth and Debra, who immigrated to Perth with son Ryan, from Bridgend, Wales in February 2004, explained how losing the security of pension assets is a big worry to many newcomers.

The family’s move to Perth has been a great success and buoyed by a booming economy they enjoy many of the things British people idealise about Australian life. They enjoy an abundant lifestyle and live the dream of a big four bedroom home on a sprawling suburban block with a swimming pool. And, Ryan, a sixteen year-old music management student and guitarist in contemporary rock band, Toys In Trees, is progressing towards a career in the music industry.

Gareth says, like many immigrants, he and Debra have been exposed to plenty of confusing advice about the best way to transfer their pension assets. The fitter machinist claims he’s received suggestions that he may lose a big portion of the pension he contributed to during his 20 year working life in Wales.

“Some of this advice comes from well-meaning friends or acquaintances, but it can be misleading and worrying,” Gareth says.

“I’ve heard things like the British pension can’t be accessed until a person reaches retirement age; that it may be much better to wait a few years before transferring it or that you may have to give up a portion of it.

“The best thing to do is to get independent advice from someone who is experienced at transfers. If you don’t get the right advice, you may end up paying way too much in taxes or transfer fees.”

Gareth says an immigration agent put him in touch with McKinley Plowman, a Joondalup accounting company which specialises in United Kingdom pension transfers and the family’s assets were safely transferred in a timely and tax effective way.

He learned that another difference between UK pension funds and Australian superannuation funds, such as  a self managed superannuation fund, is there can be greater freedom to choose investments. Gareth and Debra now have a self managed superannuation fund that is invested in a diversified portfolio of blue-chip shares such as BHP, Commonwealth Bank, and Woolworths.

UK pension specialist Murray McKinley says fear of losing the security of a British pension is a big issue for many newcomers to Perth. But Murray says moving funds to tax-effective qualifying Australian superannuation funds offers many benefits including a tax-free retirement income, flexible investment opportunities and long-term asset protection.

“Unlike UK pensions where, in some situations, the spouse loses half the asset value when a member dies, Australian superannuation assets are passed on to a partner or beneficiaries in full,” Mr McKinley said.

“Also, Australians can take 100 per cent of their super on retirement at age 60, whereas UK laws only allow for 25 per cent to be taken as a lump sum.”

Hamish Dunbar of Global Destiny, a financial planning company that has transferred over 2000 UK pension plans to Australia, agrees that the Australian superannuation system allows for a wide choice of investments, and offers very tax-effective options for taking benefits.

“In general terms, UK pension income paid to a permanent Australian resident is treated as taxable income, whereas income paid from an Australian superannuation account is tax-free for those aged 60 or over” Hamish says.

“Whilst tax may apply on the transfer to Australia, the key to minimising any liability is timing”

It is important to begin the transfer process, which usually takes up to four months, as soon as Australian residency is obtained. Pension transfers made within six months of obtaining residency do not incur Australian tax. However, pension transfers made after six months of gaining residency are subject to an Australian tax of 15 per cent which applies to any increase in the transfer value of the UK pension between the time someone moves to Australia and the time pension funds arrive here.

Both Murray and Hamish stress the importance of transferring British pensions to an Australian Qualifying Regulated Overseas Pension Scheme (QROPS). They say those benefits transferred to a non-QROPS fund face a UK tax charge of up to 55 per cent on the pension by Her Majesty’s Revenue and Customs.

Murray says many British people who transfer their pension do worry about being subjected to the volatility of the market. He says it is important for each individual to seek professional advice about the right portfolio balance to suit their tolerance for investment risk.  For example, some people may prefer all cash and term deposits, while others may want all Australian shares, or a mix of both.

He says investors like Gareth and Debra with diversified portfolios in blue-chip shares and good listed property trusts have positioned their funds for  long term growth.

Blue chip companies like BHP, the Commonwealth Bank and Woolworths are well-managed companies with low debt levels and a history of delivering profits.   “The moral of the story is it’s time in the market that matters.”

Hamish and Murray warn newcomers to make sure they don’t pay too much to have their pension fund transferred to Australia: using an adviser who doesn’t specialise in UK pension transfers can result in several sets of transfer fees. This is because non-specialists have to send pension extraction and transfer to a third party to complete, thereby resulting in a second set of fees.

“Incorrect tax advice can be very expensive and result in Australian Tax Office penalties,” Murray says. “This is the last thing someone wants when starting out in a new country.”

Debra, a teacher’s aid, says while Australia has been very kind to her family it is naïve to think there won’t be challenges when moving here. She urges expatriates to seek quality advice about all sorts of things and do plenty of research whether it be housing, schooling or investing. Debra says, just like back home, there is a ladder process to establishing one self in a new country.

“For example, you may not walk into that dream job straight away because you don’t have local references”, Debra says. “It also pays to really look around and think about what you want from life in Australia when you search for a home here. A lot of people move to suburbs on the outskirts of Perth because they want to be by the beach. This may be a novelty at first, but, when it gets down to permanently settling here, you may find that you are not that much of a beach lover.”

“We tried a few places and then decided we really wanted to be closer to the city so that we can have ease of access to entertainment, restaurants and rugby games.”

When it comes to seeking financial advice, Debra says it’s important to make sure the adviser provides a number of options about how to invest the money. She advises not to be lured in by the comments and statements of well meaning acquaintances because it’s highly likely their situation or experience is not a complete carbon copy of your own. “We’re extremely pleased with the outcome,” Debra says.

“There’s a good chance that we would have ended up paying far too much tax if we listened to others.”