Foreign Perspectives

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Although most people give this little thought, it’s potentially going to have a major impact on your life in Australia, depending on how close you are to retirement and what arrangements you have put in place ahead of that move.

Final salary pensions (technically called defined benefit pensions) are going to stay in the UK, because they can’t be moved. In some cases, you can have your company pay the pension directly into an Australian bank account, but check the charges before you do that: some may make the payment via Swift which could cost you £25 or more each month in charges, plus charges to exchange the pounds to Australian dollars. Much better it to have it paid into a UK bank account and do the transferring to Australia yourself e.g. if you have an HSBC UK account, you can transfer this instantly for almost no charges to an HSBC Australia account. Final salary pensions will almost always get the increases that you’d have received if you still lived in the UK.

The UK State Pension can’t be moved to Australia but they can pay it directly into an Australian bank account. As above, I’d be more inclined to get it into a UK bank account and do the transfer myself as you know what the charges are going to be. This pension will not increase after you move to Australia so no more triple lock or indeed any increase at all. Worth noting is that Reform are talking about eliminating state benefits for immigrants and they appear to include the state pension in that, therefore it would be prudent to get any non-UK nationals moving with you British citizenship before you move, which currently costs about £1600, but given that it could lock in the entitlement to a UK state pension of £10,000/year or more that seems like a good investment.

Defined contribution pensions, private pensions, SIPPs, and similar pensions generally can be moved to Australia. However, there are limitations applied by both HMRC and their Australian counterpart. HMRC requires any pension to move to a QROPS compliant pension scheme which means in practice for Australia a Self Managed Superannuation Fund (SMSF). This is similar to the UK SIPP scheme but with a lot more administrative overheads and therefore a lot more cost: typically the setup and annual fees run to around A$2000 or so. You can’t use an off the shelf SMSF due to the HMRC regulations, notably that no member of the scheme can be less than 55 (so you can’t transfer the pension until you are at least 55) and you will need to have the SMSF administrator create a scheme meeting those regulations. The other big limitation is that you can’t transfer more than A$120000 (about £60000) per year and can only do this up to age 75, which may mean that your SIPP can’t be transferred in one go and it may not be possible to transfer a larger SIPP in full even over a number of years e.g. a £600000 SIPP would likely take more than 15 years to transfer (not 10 because it will, one hopes, grow in value as time goes on). One way to accelerate the transfer is to transfer, say, £60000/year into your SMSF and simply withdraw another £60000/year, taking the Australian income tax hit on that second £60000, and just put it into an Australian investment account.

Australian state pension is means tested in two ways. The income test means that you get the maximum pension if you’re single and have less than A$109/week (£50), A$170/week (£75) for a couple and is reduced by 50c/25c for each dollar above those amounts, reaching zero when you’ve more than A$1287 (£643) single, A$1967 (£983 for a couple. Given that the UK state pension is currently £230/week, you’re not going to get the maximum Australian pension under the income test. They also have an asset test, so a single homeowner can have up to A$321500 (£160750), A$481500 (£240750) for a couple to get the maximum, reducing to zero when you reach A$714500 (£357250) or A$1074500 (£537250). The asset limits include everything except the home you’re living in, so notably it includes pension schemes of all types. Last, but not least, you need to have been an Australian resident for at least ten years, unless you’re Australian (in which case, you could pop your claim in as soon as you’ve arrived). Unfortunately, the UK no longer has a social security agreement with Australia (it did up to March 2001) so no exemptions from the ten year limit.

ISAs aren’t transferable and there doesn’t seem to be any Australian equivalent unfortunately. You can retain your ISAs but since Australia doesn’t recognise ISAs, they will be taxable; you can’t add any more money to them once you leave the UK. Australian tax law means that capital gains are taxed differently depending on how long you have held the asset, so it may be simpler to move the holdings from your ISA to a dealing account in Australia when you move. T212 operates in Australia in much the same way as it does in the UK, aside from the lack of an ISA and you seem to be able to transfer from a T212 UK account to an Australian one; it seems to be a lot cheaper than local Australian brokers.

And that’s it for pensions. You will need to get an adviser to set up an SMSF for you and the main banks have partnerships with companies that can do that (National Australian Bank seems the best offering).

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

We’ve been investigating how our banking, investments, savings, pension, and mortgage will work when we move to Australia as we can explore that now rather than wait until everything is happening at once.

Banking turns out to be relatively simple. Many people will use Wise initially which, although not an actual bank, will give you local account numbers in both the UK and Australia. Although both will work for the usual direct debits, payments, and debit card transactions, the Australian one has some limitations, specifically it can’t be used to receive social security payments. However, much better is the HSBC Australia Everyday Global account which is a proper Australian bank account and is the only Australian bank that let’s you fully open an account from abroad (tell them that you’re using it for saving, NOT that you’re going to be moving there); the debit card arrives in a couple of weeks. Although you don’t have to have an HSBC UK Advance account, if you do, you can do instant transfers from it to your HSBC Australia account. The other plus point of this is that HSBC UK will let you keep that account when you’re living in Australia. Transfers in the reverse direction take a day or two unless you have HSBC Premier. You need to use the HSBC Australia account every month or two so that it doesn’t go dormant.

Savings are more tricky as many banks and building societies will require you to close your accounts when you move abroad. Notable exceptions to this are the Nationwide, HSBC, Lloyds, and RBS/NatWest. If your cash ISA is with one of these, you could keep it but a) can’t add more to it and b) the interest will be taxable in Australia as they don’t recognise ISAs. The same mostly applies to investment ISAs and investments generally.

Banking in Australia is a bit different. When you move, you’ll find that many of the UK banks and building societies will close your account so you want to have one or more of the above opened before you move, as you’ll not be able to open them afterwards. As you’ll notice, those I’ve mentioned above are legacy banks and in practice most (all?) of the fintech banks (Kroo, Monzo, Starling) will close your account. If you fancy a fintech in Australia, there’s UBank and Up, but you can’t open those until you are an Australian resident.

Pensions are rather more complex. Due to HMRC requirements, if you are going to transfer your pension then it can only be to an Australian SMSF which is QROPS compliant which in turn means that you’re looking at setup fees of around £2000 and similar annual fees after that. The maximum that you can transfer in this way is A$120000 (£60000) per year (potentially triple that in your first year). Alternatively you could just access your UK pension from Australia and simply declare the withdrawals in Australia (they’ll generally be subject to Australian income tax as if you tell HMRC that you’ve left, they won’t apply UK tax). Given that my UK SIPP costs all of £120/year, my current thinking is that I will just leave it in the UK and make withdrawals as I’d have done if I’d still been in the UK. One thing to note is that you don’t need an international pension and any place that seems to offer one is likely a scam. That said, some normal SIPPs come in a rebadged international version so, my one with AJ Bell does, but it’s just the same with a different name on the tin. You can only transfer defined contribution schemes, not final salary ones nor your UK state pension. If you tell the state pension people, they can pay your pension to an Australian bank account in Australian dollars, or you can get it paid into a UK bank account. As I say, this is a complex area and you’re going to need advice on this.

Credit cards are something that you may want in Australia, however you won’t have a credit history when you turn up obviously and therefore will likely get rejected when applying. Two ways around this are to open an American Express card in the UK before you leave and use their Global Transfer service (basically you apply for a card in Australia and in the application check the box that says existing customer and you should be in business. Their Australian cards mainly come with a fee and to my mind, the best currently is The American Express^® Platinum Edge Credit Card which is A$195/year after the first year but comes with enough supermarket discounts to, for me, cover the cost. If you don’t want a fee, there’s The Qantas American Express Discovery Card and The Low Rate Credit Card. Worth noting is that Amex acceptance seems much lower in Australia than it is in the UK. The other way around no credit history is to apply for an HSBC Australia credit card as they will check your UK credit history; their Premier card is free and their low rate card is A$99/year.

So what about a mortgage? If you’ve a mortgage on your UK home, you’ll likely have to pay that off before you go, or essentially change it into a buy to let mortgage (the interest rate will usually be about 1% higher). You seem to be able to keep a buy to let mortgage going although it’ll be a bit more complicated when you come to renewing any fixed offer that you may have and your choice of banks offering it will likely be more restricted. What about an Australia mortgage? Still to be researched more fully, but they look much the same as UK mortgages, albeit with fewer options and, of course, there’s the business of proving your income in Australia.

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

This is the first year that it’s become truly possible to take control of your own pension. Up to now, most people with money-purchase (or defined contribution) pensions had to hand over their money to an insurance company and buy an annuity with it. Thankfully, that practice is ended and we get to keep the cash.

What’s stopping a lot of people is simply lack of understanding of what a pension is. In fact, it’s really quite simple: it’s a savings account that you use to build up a sum of money that will eventually provide enough income to support you in your later life. Despite all the changes, it remains a limited access account. Once you put the money in, you can’t take it out again until you’re at least 55. However, when you put the money in, you get a tax rebate so that, for a basic rate tax payer, every £1000 you put in becomes £1250 in the pension. Anything that you withdraw from it is subject to income tax but with an allowance that means that the first 25% you take out is not taxed, whether you take this out as a single large lump sum (as historically people did) or as a series of smaller amounts (in which case 25% of each withdrawal is tax free).

If you’ve had a few jobs over the years, chances are that you’ll have a small pension account for each one. Small pension accounts are generally bad news as the charges, particularly on older accounts, can be rather high. If this sounds like you, it’s best to investigate the possibility of combining the various accounts which will reduce the charges and let you take control of your pension.

Are you up to taking control of it though? The sums involved in pensions can be quite substantial and the sheer size of the sums can put people off managing the money themselves. If you’re comfortable with the amount involved, there are a range of Self-Invested Personal Pensions (SIPPs) around that will let you do that but equally you can choose an investment manager to look after the account for you.

Either way, you need to establish what your objectives are and what your attitude to risk is as that will determine just how the pension account is invested.

As with everything in pensions, the timescale for transfers can be surprisingly long. To move a company pension to a private one (which will normally require you to take professional advice) can take four months or more but even a simple transfer is likely to take a month or two. Mind you, that does have the advantage that it gives you a lot of time to think about how the fund will be invested which is no bad thing.Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

Up until last year, the clear answer was with an increasing proportion of bonds as you approached retirement. However, that advice assumed that you would be buying an annuity on retirement therefore the rising proportion of bonds was aimed at stabilising your pension fund as you got closer to the point of purchasing the annuity.

All that changed last March when the chancellor announced that you would no longer be required to buy an annuity and could continue to manage your pension fund as you saw fit.

But, what does that mean in practice? Well, you don’t have the cliff-edge of an annuity purchase therefore you can carry on running the fund as you would have done ten or twenty years earlier. This means, that you can carry on largely in equities and, in principle, should let you have a rising income over the years that you are in retirement. On a related note, since the fund will go to your dependents, there isn’t the push to spend it all as there would otherwise have been and, of course, you wouldn’t want to run out of money either.

What you can do depends a lot on your circumstances and temperament. For example, if you’ve got the average pension fund of around £30,000 then you’re quite limited. That’s not really enough to allow you to take many risks and probably only really enough to act as a top-up to your old age pension which, in practical terms, means that you might well be best with an annuity. Move up to £300,000 (which a surprisingly large number of people will have) and it’s a whole different ball-game. For a start, that’s well above the minimum that a range of investment managers will take you on and it’s enough to allow you to move more into equities i.e. to take on a bit of risk.

What’s key though is to know what your attitude to investment risk is. Could you sleep at night if your pension fund dropped 30% for instance? Could you convince yourself that it wouldn’t matter if it did? (and it doesn’t – it’s the income that matters on a pension fund, not the capital value)

 Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

The problem with customer service jobs in difficult economic times is that the customers demand a whole lot more when the economy is in a bad way.

Even the bargain basement shops are forced into upgrading how they deal with customers these days although, so far, the local LIDL hasn’t risen to the customer service levels of the LIDL shops in France. That’s pretty odd really as France isn’t exactly known for high customer service levels so it’s puzzling as to why the bargain basement shops have much higher customer service levels than the very same shops have in the UK.

However, there is the small problem that in difficult times, there isn’t the scope to improve customer service through adding to staff numbers nor even through extra training for the staff. What’s needed is a cultural shift in the organisation so that people automatically do the small things that can often make the biggest difference to how service is perceived.Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.