returning to UK to retire - any financial traps ?

steamingbill

Hello,

Newbie to this forum.

Have put house on market and when sold will move from Australia to UK in order to escape hot summers and be closer to wifes family. Anybody want to buy 20 acres in paradise ?

There is a massive amount of publicity and advice and assistance for people moving from UK to Australia, QROPS is a big thing and lots of companies trying to get commissions on the transfers etc. ,but almost nothing for people wanting to shift the other way.

Am particularly interested in best way to manage retirement funds when we shift, in order to optimise our funds and minimise fees and taxes.

I wrote to HMRC looking for advice and only got a vague response that was useless.

So any accountants / planners/ advisors who read this and have some experience in assisting expats to retire in UK please feel free to contact me.

Anybody else out there who are expats retiring back in UK have any stories to tell about any traps to avoid ?

My thoughts so far ..............

Take out all Aussie super funds before we leave and start afresh in UK ? Am a bit snookered here because am not yet 60 and face a 15% tax slug if I withdraw all funds .............. but am wondering how HMRC would tax the funds and the lump withdrawal if I am a resident of UK when I do it ?

Leave all funds in Aussie super ? How would HMRC tax the earnings on these funds ? Currently paying 15% on earnings in my fund (Accumulation Mode) and my wifes fund is in Pension Mode so earnings are tax free.

What fees are appropriate for transferring large sums of money internationally - anybody transferred significant sums using the cheaper non bank organisations ?

Havent been able to find anyone in Australia to advise on these issues and am hoping to meet with advisors in UK when we come over this year for holiday. Its a tad complicated because Australian financial planners and advisors are not allowed to give advice regarding other countries.


Regards

Bill

atush

I dont knwo about the taxes faced when transferring, but there are some tax wrappers to use here once you are resident again.

How much do you have to tide you over to age 60 when you can take the Aus money w/o the 15% hit? Will you engage in any employment at all, even PT? What is your status with state pension, have you applied for a forecast/statement- do you know how many years credits each of you have?

Once you are here, you will find you can each open ISAs with some of the money (ie S&S isas). The income and gains from these will be tax free. Each of you can also open a personal pension (even if you have no employment) where you put 2880 into a pension each/each year, and the govt will boost it to 3600 with tax relief. If you work at all, and earn more than 3600, you can put in up to as much as you earn.

For cash reserves, right now (and i suspect until rates rise) you can use some current accounts for savings, earning 3-5%.

For investments outside of pensions and ISAs you can use unwrapped accounts with brokers and invest the money to live on the income.

You will find house prices have risen to silly figures, and you may find it hard to live in the climate being used to Aus. So might need to be looking to live in the south somewhere.

xylophone

http://www.financialadvice.net/australia_expat_financial_advice/zone/1364

You would be well advised/ need to consult an expert - the type of thing above?

sandsy

I was quoted a Departing Australia Super Tax rate of 35% last time I enquired about transferring my Super out. But I only have a very small pot from temporary employment there.

Investment income in pensions rolls up effectively tax free here compared to the 15% in Australia.

You might want to be aware of HMRC's Extra Statutory Concession A10 (ESC A10), particularly if your pension fund was acquired through employment prior to April 2011. It might help you get some of it out taxfree. But information on the internet is rather sparse on the detail of how it works. It might be worth contacting HMRC's International pension centre for more information.

I recently transferred large sums from overseas to the UK using the banking system. Cost was about £25. For the amounts of money involved, I'd rather use properly regulated organisations.

steamingbill

Thanks for the responses.

Atush - Thanks for the suggestions. Yes there are a whole heap of things regarding possible future employment etc that I have been pondering and must wait and see what happens when we get there. Believe me too cold is far better than too hot - I simply wasn't designed to do hard work on days above 30C.

Xylophone - Thanks for the link, I have contacted them, my experience with most of this type of site that I have seen so far is that they are only interested in helping people move funds into Australia and not out of Australia.

I was hoping to somehow start paying "stamps" after we arrived in UK, I believe there are fairly massive restructuring and revisions of your superannuation systems occurring at the moment and I will investigate further the option of starting our own ISAS after we get there. I'm aware of systems where some credit can be applied to state pension as I have worked in Australia for many years and if I can prove this to statutory authorities then some credit to pension is possible.

There are calculators where you can keyin various data and get an estimate of your British State Pension pension - interesting and useful things.

My family emigrated to Australia when I was 12 so although my wife exists in the British tax and national health and pension computer systems and is now receiving state pension I don't have any footprint whatsoever apart from a passport.

Sandsy - thanks for the suggestion about HMRC International Pension section - will give them a try.

Regards

Bill

HappyMJ

If you were 12 when you were here then there is probably a record of you. Your mother would have been claiming Child Benefit which would have created a record. You would also have an NHS number somewhere out there.

When you get back you'll need to register to find out what your National Insurance Number is. There's not much you can do until you get that. You can start work without it if you have a job to go to.

There's no credit for having worked in Australia. There is no social security agreement.

You will get your superannuation payment either now with tax taken off or when you retire (I have left mine there) so you won't be penniless and you will get some sort of basic state pension as long as you accumulate enough years before you retire.

Eventually you will think about private pension contributions which aren't compulsory as they are in Australia and you can look at the pros/cons of it then. It's much easier to do that once you're here. I would spend time settling in first finding somewhere to live and a job before worrying about that.

C_Mababejive

I think the Britishexpats forum has a section for returners,,might be worth a look??

xylophone

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS25_Returning_from_abroad_fcs.pdf?dtrk=true

may be of interest, particularly as your wife is receiving a UK state pension.

https://public-online.hmrc.gov.uk/lc/content/xfaforms/profiles/forms.html?contentRoot=repository:///Applications/NICs_iForms/1.0/CA5403&template=CA5403.xdp may be worth a try to locate your NI number.

With regard to the UK state pension, the new system starts on 6 April.

See https://www.gov.uk/new-state-pension/overview

atush

Yes, with the new system you will need 10 years contributions before you receive any state pension at all. So if you dont work, you should think of buying some years. or buying enough to get you to ten on top of what you earn.

just_looking_here

How have you got on since March?


I've been looking into this too and there is very little useful information that seems to be available.


My husband is in a similar situation, but we plan to stay out of the UK for some time yet. You can't backpay National Insurance from outside the UK unless you have worked in the UK for 3 years and this should be recently. It's my understanding that once you arrive back you can get your National Insurance Number and then work to start the process of gaining your 'stamps' / NI credits.


As far as I can tell, you need to work for 3 years to be able to voluntarily contribute enough to accrue the minimum 10 years needed to obtain any UK pension. I don't think that you get any NI credits if you sign on as unemployed. Obviously if you start work at 60 and the Statutory Retirement Age is 65, you may never be able to get the 10 years needed to get any UK State Pension. I think that if you work past your retirement date your employer still pays into the system but you don't or you can elect not to pay after that date. You would need to check on this scenario.


However, there are other reasons for working once you arrive in the UK apart from the obvious need to earn money! If you want to roll money obtained in Australia into a UK pension wrapper, as a non worker you can either put in 3000GBP per year and HMRC contributes 20% to make it up to 3600 or you (and wife) can work and put in to 100% of your (gross?) salary or 40,000GBP (whichever is the smaller) and get HMRC to contribute according to your tax code. Depending on your company, you may also get matching contributions (possibly up to 6%) from them so this could be useful if you arrive 'cash rich'.


From memory you can carry on contributing to a SIPP or other private pension even after your Statutory Retirement Age, but you will need to check on whether you can contribute and draw down at the same time. If you are not working it's the smaller amount as a maximum contribution.


Also note that if you are taking out the 25% lump sum you are allowed to take tax free from your pension, HMRC take a very dim view about you contributing this to another pension and expecting their 20% contribution!


I also seem to remember that age 75 was important, but it may have been a reminder to check whether the Stakeholder Pension I paid into for 5 years after I left the UK makes me take an annuity at this age, rather than the age limit you are allowed to contribute to a pension and still get HMRC to contribute.


Moving forwards the ISA allowances have increased and are expected to get larger in the next few years. This can be a way of moving money to a tax efficient account; either a cash ISA or a stocks and shares ISA. Get some advice about how to optimize this especially if you think you'll need to take money out for house buying etc.


Have you looked at the UK tax information on capital gains? If you and your family have been out of the UK for more than 5 years you may want to 'crystalise your gains' by making sure you cash out any investments and other offshore assets. You can choose to rebuy investments, but get some advice before choosing which are preferred as some get better 'protection' in a UK SIPP (self invested personal pension) or in a stocks and shares ISA.


I was also looking to see what forms of tax free income could be found to support us whilst we worked. The intention on return was to push all our salary and as much of our savings as possible into ISAs and UK Pensions since we don't have any company or government pensions.


Things to consider, depending on your circumstances are rent-a-room where you can obtain up to 7500GBP per year per household (in the south-east / London) for having a lodger and from 2017 you can get 1000GBP for renting out your driveway or sharing tools / household equipment. Be careful if you try this whilst in rented accommodation as you may fall foul of your lease or insurance cover!


Before you actually retire, it might be worth talking to a tax consultant / accountant about how best to 'pay yourself'. It seems that if you optimize what is deemed as 'earnings' i.e. from a pension etc. (keeping below your personal allowance if possible) you can each use 1000 GBP per year tax free allowance from savings interest, the 5000 GBP per year allowance on income from dividends, and the 11,100 capital gains allowance if you sell something at a profit whilst retired e.g. shares. From memory there was also another savings allowance you could use if you 'earned' less than 17000 GBP per year.


These may be more useful if you cannot push a lot into your pension and are having to manage your income through investments or receiving income from your offshore pensions.


Hope that helps?

Joey_Soap

A few observations for the OP to consider -

If you're moving to a cooler climate, go to Tasmania?

Or New Zealand? - Either option would be far easier.

If you're determined to come back to the UK, the good news is that the AUD is worth a fair bit more than it was this time last year against the GBP. Living here and house buying is now much cheaper for you than it was a year ago.

Have you thought about moving to the Isle of Man? Just like the north west of England but with a better tax jurisdiction. If you have UK passports, you can move straight there.

Have you considered Portugal? You can get a retirement visa there for 10 years that entitles you to pay zero tax on your pension income from outside Portugal. If you have UK passports, you can move straight there. Housing costs (especially in mid or northern Portugal) quite a bit lower than the UK.

Or Cyprus? 5% tax on pension income. Again, if you have UK passports you can move straight there.

Hope that helps you!

A word of warning, if you engage with a UK financial adviser, make sure they are "independent" and check them out for current registration to advise on international pensions business with the UK government regulators. Be careful, there are a LOT of sharks out there in that market. Try to get personal recommendations from a person you trust.