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.

International Social Security Agreements in Australia

You can submit a payment claim for your Age Pension benefits even if you have moved or will move outside of Australia. You will add together your social insurance periods - when you were paying into Age Pension in Australia - or submit the dates of your residence in Australia to show that you meet minimum requirements for an Australian pension.

In most cases, to qualify for Age Pension under the agreement between Australia and another agreement country:

• You must be over the qualifying age.
• You have been an Australian resident for 10 years, total
• At least 5 of your years as an Australian resident are consecutive

Details for other benefits are available from the Australian government website.

Payments of Australian Age Pension are affected by your travel. You should tell the Australian government about your travel if:

• You are going to live in another country

• You will be traveling for more than 6 weeks

• You are being paid under an international social security agreement

• You are returning to live in Australia or have returned in the last two years

What happens to my pension if I travel between Australia and New Zealand?

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.

How long can I travel overseas before my pension payments stop?

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. Sign up with OFX to get started.

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.

 

If you do find a QROPS approved fund, you may need to pay a 25% tax if you transfer your pension to a QROPS scheme based in the European Economic Area (EEA) if you:

 

• 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.

Do I have to transfer my entire pension if I am retiring abroad?

If you have a pension account in one country but are relocating for retirement, there are a few  ways to handle your pension:

1. You can leave the pension in the origin country and have regular payments transferred to an account in the country where you have retired.

2. You can move the whole pension to your retirement country and either take a lump sum payment or invest it in a new pension scheme within that country.

3. If you have more than one source of retirement income, you may wish to transfer one as a lump sum while leaving the other as monthly payments.

If you choose to keep your pension account in the origin country, some pension providers may not transfer money to a foreign bank account. Or, they may charge high fees for doing so. OFX can help you save substantially on fees and margins, if you’re making regular transfers from one bank account to another account in a foreign country.

Often it is preferable to have pension payments paid to a bank account in the same jurisdiction as your pension and then to transfer the money abroad yourself. This may help to avoid certain taxes that apply for early withdrawal as well as high bank fees and margins on the exchange rate.