Guide to moving your pension abroad

What is an International Social Security Agreement?

An International Social Security Agreement helps governments work together to ensure people are supported as they age when they have lived and worked in more than one country. For instance, Australia has thirty International Social Security Agreements in place, so people can migrate and still receive social security benefits.

What are Double Taxation Agreements?

Double Taxation Agreements are usually tax treaties that exist between two countries to prevent double taxation of international individuals and businesses.

One of the risks when it comes to moving your pension is that you may be taxed twice – both by your home country and by the country where you transfer your pension, if there isn’t a Double Taxation Agreement in place. Please note: In most cases,if the tax rates in the two countries are different, you will probably end up paying the higher tax rate.

Depending on where you are trying to move your pension you may be eligible for “full relief” or “partial relief” from double taxation. You will have to submit a claim form to get relief from double taxation. You may submit it prior to the transfer so you are not taxed, or after the transfer so you are reimbursed for the tax you have already paid. Consult your pension or retirement account manager or the government taxation office for details on submitting these forms for relief from double taxation.

While the International Social Security Agreement applies to lots of countries, a special agreement with New Zealand has been made for Australians who are moving there or visiting New Zealand while they are away from Australia.

For qualifying residents of Australia, the time you spend in New Zealand is added to how long you have lived in Australia while you are between the ages of 20 and 65 years old. This is applicable even if you stop in New Zealand as part of a broader trip to visit long-term or permanently move to another country.3 For example, a person between the ages of 20 and 65 who plans to move to another country, but stops in New Zealand for 6 months first, will have those 6 months added to their Australian residency. Since Age Pension requirements include Australian residency, time spent in New Zealand should be documented, so payments are issued correctly.

For Australians, you can travel overseas and receive pension payments while doing so, though the payment may change depending on how long you are out of Australia. These payments will be deposited into your Australian or a foreign bank account. If you use a foreign bank account, the Reserve Bank of Australia will transfer your funds at the current exchange rate. If you transfer funds yourself from your Australian bank account to a foreign account, you can work with a foreign exchange company like OFX to help you get the best exchange rate.

Short travel – under 6 weeks

If you are traveling for a short period of time – less than 6 weeks – you can expect your pension to stay the same. Your rate and payments won’t change, though you should notify Centrelink that you are traveling.

Less than 12 months travel

If you are travelling for less than 12 months, and you want normal payments into your Australian bank account, then you can set up your online account to do all of your reporting and submissions. Your pension rate will change to the rate that is paid for those outside of Australia. This rate is calculated based on income and asset test.

More than 12 months of travel

If you are travelling for more than 12 months, your payments will be made only every 4 weeks and you will be subject to the rate available for those outside of Australia. If you choose to have the payments submitted to an overseas bank account, the Reserve Bank of Australia will use the current exchange rate, and your funds will arrive in local or US dollar currency. You can have the funds transferred to your Australian bank account and complete the foreign transfer yourself, which may save you substantially on foreign transaction fees and exchange rate margins.

What are QROPS or ROPS?

QROPS stands for Qualifying Recognised Overseas Pension Scheme. These are overseas pension programs that have been vetted by U.K. tax law and have been shown to meet qualifying criteria for transfer. There may be fees and charges for transferring to a QROPS pension.

A list of available QROPS is available on the HM Revenue and Customs website.

What are the tax implications of moving your pension abroad from the U.K?

To transfer your pension from the U.K. to another country, you need to be aware of current Qualifying Recognised Overseas Pension Scheme (QROPS) requirements outlined by HMRC. In the U.K. failing to transfer into a qualifying account can lead to a minimum 40% tax on the money you transfer. Various taxes may apply based on where you transfer and where you live as well as any moves you make within 5 years of the transfer. (Please be advised that you are responsible for determining whether or not is QROPS before the transfer is made, otherwise it could be considered an unauthorised transfer with more penalties.) If you do not transfer your pension into a qualifying QROPS pension scheme, you may be taxed up to 40% on the transfer.

Live outside of the EEA
Move to live outside the EEA within 5 years of the transfer.
If you are taxed, but you move to an EEA country within 5 years of the transfer, you can place a claim for a reimbursement by talking to your pension administrator. You usually don’t pay a tax if you transfer to a QROPS scheme provided by your employer.

Some countries will require proof of travel insurance before issuing a visa to you, so do your research into requirements before you move. Give yourself enough time to enroll and to receive all of the documents that you will need to prove that you are covered.

If you are moving to a non-English speaking country, be aware that you will need to learn the new language if you want to get around easily once you settle into your new home. Because learning a new language is a long-term commitment, start as soon as possible. That way by the time you move, you should at least know the basics necessary to get around, including how to read street signs and ask for help.

With an international driver’s license, you may find it easier to drive abroad, and you may need it if you are planning on renting a vehicle in most nations. Once your original driver’s license expires while you are abroad, your international license will expire as well, so you can then apply for a license in your new country of residence. Be sure to take a copy of your driving record with you when you move so that you can use it to apply for a new license and potentially avoid having to take any tests. You may also need a copy of your recent driving record for getting auto insurance, if you buy a vehicle abroad.

A good way to get some extra cash before your move is by selling whatever belongings you do not plan on taking with you. Once abroad, most non-essential items become cumbersome, so try to cull any items that you don’t need. If you’re leaving a home that your own, you may want to compare the market value of renting it out with the furnishings included, or putting your things into storage. No matter how careful you are with packing and preparing, your life will change in unexpected ways while abroad. You may need to adjust your household budget accordingly and expect to acquire some things new.

To make moving abroad as easy as possible, take as little as possible. For the items that you can’t leave behind, use an international shipping company to have them securely packed and shipped. Get quotes from various companies, so you can find the most affordable match that will provide the best value. To save money, think clearly about the gap between when your shipment arrives and how long you will have to live without your things. For instance, if you can’t go a month without a frying pan or microwave, there’s not much point to paying to ship items that you’ll probably end up purchasing for immediate use. Similarly, don’t pay a premium for expedited delivery if you don’t need it. Faster shipping may increase your costs of warehousing and storage, if you haven’t found a permanent home by the time your goods arrive. And to be certain a company is a reliable choice, check its credentials and accreditations, such as FIDI Accredited International Mover (FAIM) accreditation. Avoid companies that have terrible customer reviews, that request cash or large deposits, and that don’t provide insurance or storage options.