A long term client of ours recently got in touch with us with some disturbing news. As a UK resident, she completed a number of years of work in the Public Health Sector prior to moving out to Australia. And accumulated a reasonable amount in Superannuation benefits in the UK.
A bit of investigating on our part established an important change that is in the process of going through the UK parliament. The second reading of the Pension Schemes bill took place on September 2n, 2014. Once this Bill is enacted, the April 2015 prohibition of “Unfunded” Public Sector Pension transfers will become law.
April 2015 is an important date
What is a certainty is that these unfunded funds will no longer transfer benefits after April 2015. What is less certain is how they will manage requests for transfer received prior to the cut-off date.
I can imagine that this change will lead to an avalanche of requests from Ex UK Pension scheme members wishing to have their funds transferred across to Australia ASAP. This will inevitably lead to a significant backlog that could take far longer to process. And we already know only too well that these requests are dealt with at a snail’s pace as it is. Hence the uncertainty around what will happen post April 2015.
The take out from this is that if you are in one of these “Unfunded” funds (occupations that could be impacted by this include nurses, teachers, fire fighters, police offices, armed services members and doctors employed in public health), you should probably think about exercising this choice right now.
Unfunded funds are more common overseas than they are in Australia. Typically, there are two ways of funding Pension (Superannuation) schemes around the world.
- An employer sets aside an amount of money on a regular basis. A fund’s manager invests these funds with a view to providing an asset which will provide a replacement income upon the retirement of the individual
- Conversely, some employers (Government generally) choose to fund the income replacement upon the individuals retirement out of current earnings. This is considered as a pay-as-you-go pension plan. The risks to the individual member of this type of plan and approach are fairly obvious.
Despite our note in relation to the risks, the more important question right now should be “Do I intend on retiring in Australia or not?”
If you are planning on retiring in Australia and would like to have the choice of moving your Pension arrangements from the UK to Australia, now is the time to act. Once this window closes, there appears to be very little or no likelihood of a successful transfer.
If you would like to discuss this in more detail, please feel free to call LifeTime Financial Group to arrange a time to meet with a Financial Planner who is experienced in these matters.
Anthony Stedman CFP FFPA