BRITISH migrants are on notice with both the UK and Australia considering implementing legislation that will have a dramatic impact on the value of pensions and the tax consequences of transferring them.
While all transfers are vulnerable to the Australian changes, UK migrants are also facing changes in their homeland.
Over the next 12 months up to 300,000 British migrants living in Australia will need to seriously consider whether to leave their pension entitlements in UK funds or transfer them to Australian funds.
According to Perth company Pension Transfers Direct, migrants could be tens of thousands of dollars worse off by making the wrong decision.
The British Government is set to undertake a review of its pension schemes, which is likely to make it more difficult to transfer funds.
The UK has given many pension scheme trustees permission to suspend payment of transfer values where their scheme is under-funded.
The expected legislation will mean the amount transferred will most likely reflect the underlying assets of the funds. With the equity markets falling away in the past year concerns are growing that pensions paid out will be significantly undermined by the changes.
Pension Transfers Direct estimates that around 300,000 of the 1.2 million British migrants living in Australia have superannuation left behind in the UK totalling around $30 billion.
But it is not all bad news for British expatriates. A Senate Select Committee on Superannuation last year recommended changes to the way the Australian Government taxes money transfers into the country.
The Committee proposed, among other things, that fund managers be liable for the tax on transfers, that the tax on individuals be averaged, and a relaxation of the preservation rules.
This may make it more attractive to migrants. At present there is a six-month tax-free period for migrants wishing to transfer their pensions into Australia.
The committee recommended extending this to two years. It also recommended that tax should only apply to that growth in the lump sum that has been gained in the period since the migrant became an Australian resident.
WA is home to 40 per cent of the British migrants to Australia.
Pension Transfer Direct has helped around 500 migrants transfer more than $85 million in pension funds into Australia since it started operating in 1997.
Managing director David Ford estimates that about 1,000 migrants currently seek to transfer their pensions worth around $140 million into Australia each year.
© Business News 2018. You may share content using the tools provided but do not copy and redistribute.