Transferring your UK Pension into legalsuper 

If you have a UK pension and have been considering transferring into legalsuper, there are a few things you should be aware of. This guide will step you through the process of transferring your super as well as some of the matters you need to consider.

Transferring your UK pension into legalsuper
Transfers out of a UK pension are tested against the ‘UK lifetime allowance’ – 1.75 million (Sterling or Pounds) in the 2009/10 financial year. This allowance is set by the UK Treasury each year. The amount below this lifetime allowance won’t be taxed in the UK on transfers to a Qualified Recognised Overseas Pension Scheme (QROPS) of which legalsuper is one. However, any amounts transferred that exceed the lifetime allowance are taxed at 25% in the UK. Other charges may apply after the transfer. 

(note - legalsuper is a qualified recognised overseas pension scheme (QROPS) in Australia)

Transfers to non-QROPS funds
Transfers to non-QROPS finds are treated as ‘unauthorised payments’ in the UK, taxed at 40%. If the amount transferred in any 12-month period is 25% or more of your UK pension balance, an extra 15% unauthorised payment surcharge applies. So total tax could be up to 55%.

What happens once my money is transferred to legalsuper?
Generally, within Australia no tax is payable provided that the transfer comes from a UK pension fund within 6 months of you becoming an Australian resident. If you have been an Australian resident for more than 6 months, tax is payable on the ‘assessable amount’.

What does it mean if my transfer includes an assessable amount?
You have two options for paying tax on the assessable amount:

1. you can nominate legalsuper to pay the tax on your behalf – at the Find’s concession rate of 15%; OR

2. If you don’t make a choice, you will pay tax at your marginal tax rate. The tax owing will be calculated as part of your income tax return for that financial year.

NB: The investment earnings that have accrued in your account since the day you became an Australian resident are taxed in Australia. The earnings accrued up to the date that you transfer the money are your assessable amount.

How will Australia’s 15% contributions tax affect me?
If you transfer your UK pension benefit within 6 months of becoming an Australian resident, the Australian Taxation Office (ATO) treats the total transfer amount as an tax exempt component, so no contributions tax is payable. Tax is payable on the assessable amount if your transfer is made outside of the 6 month window.

Have you been a UK tax resident in the past 5 years?
Under the UK pension rules any payments made from your UK transferred pension will be treated as ‘unauthorised payments’ while you are still considered to be a UK tax resident. You are still considered a UK tax resident up to 5 years after not living in the UK. Unauthorised payments attract a 40% unauthorised payments charge and, possibly a further 15% unauthorised payments charge.

A rollover from the UK to legalsuper is not considered a payment. Only cash payments made from your UK transferred super in Australia or rollovers to a non QROPS fund will attract an unauthorised payments charge if you are still considered to be a UK resident.

Contributions limits
The cap on after-tax contributions is $150,000 a year. This limit can be averaged over 3 years to allow you to make larger one-off payments of up to $450,000.

How do I arrange a transfer?
Step 1
Contact your UK pension fund and request their forms to arrange a transfer to a QROPS fund. Legalsuper can assist you in completing this form. Please contact us with any questions.

Step 2
Once you have returned your paperwork to your UK fund, they will send your transfer amount via cheque. This process may take up to 8 weeks to complete.

Step 3
legalsuper will apply this amount to your account as a tax free contribution in Australian dollars.

Step 4
legalsuper will advise you when we have received your benefit.

Step 5
If you have transferred your benefit to legalsuper once you have been an Australian resident for more than 6 months, you will need to complete an ATO form called ‘Option for an Australian superannuation fund to pay tax on payment from overseas fund’. This form can be obtained from the ATO’s website. www.ato.gov.au/super. If you have any questions about calculating your assessable amount, please call the ATO information line on 13 10 20. Please return your completed form to legalsuper.

Make a copy of the completed form for your records. The ATO requires that you keep the copy for at least 5 years for audit purposes.

More information
Before making any decision to transfer your pension benefits you should consider seeking financial and/or taxation advice from a qualified adviser.