Having a UK pension that you wish to access can be costly if you don’t understand the tax implications. Prior to taking anything from your UK pension be sure to check out the impact it may have on your balance and your tax. If you have a been an Australian resident for more than 6 months and are now eligible to access your UK pension please ensure you consider the above.
Firstly you will need to know the balance of your UK pension on the day you became an Australian resident. You will then need to know what the balance will be (as an estimate) on the day you are looking to make a withdrawal as well as the exchange rate on that date. The below example considers a person who became an Australian resident on the 1st January 2017 and wishes to withdraw their full balance of BP250,000:
• The fund value on 1 January 2017 was £220,000
• The estimated value on the date of withdrawal is £250,000 and the exchange rate is 61p to the Australian dollar.
In this instance the applicable fund earnings is £30,000 (the movement from the date of becoming a resident to the date of withdrawal). After converting this at the exchange rate on the date of withdrawal the resident will need to declare $49,180 in their Australian tax return to be taxed at their marginal tax rate. Furthermore, 75% of the withdrawal will be taxed in the UK. This means the resident will need to pay personal income tax on £187,500.
It is therefore extremely important to seek professional advice prior to accessing any of your UK pension. Please contact us here to discuss your options.
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.