Last updated: 1 August, 2017
Review the annual and early withdrawal regulations of your current pension programme.
Evaluate the details of your new overseas pension scheme and determine if there is any cross-country cooperation which facilitates transferring your pension.
Research any tax implications or further restrictions imposed by national governments in both jurisdictions.
Decide if you would actually benefit from transferring your entire fund versus taking regular payments and converting them monthly yourself.
Use OFX to save on currency conversion costs when moving your pension overseas.
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.
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.
Here is some basic information for transferring your pension or retirement to and from the U.S., U.K., and Australia.
What happens to Australian Age Pension and superannuation when moving abroad?
Age Pension can generally be paid even if you live in another country, what changes is the amount you receive. That amount is determined by how long you plan to be abroad and any International Social Security Agreements, which may apply. Superannuation is usually still subject to the rules around withdrawal as if you were living 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:
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
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 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.
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.
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.
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.
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.
Some countries will tax a pension payment, while others may tax based on how you decide to receive your pension monies - if you have a lump-sum or if you have an annuity. In some cases all three are taxed - the transfer of money to a new pension scheme, the lump-sum you receive as payment and the annuity payments.
If you have a pension account in one country but are relocating for retirement, there are a few ways to handle your pension:
You can leave the pension in the origin country and have regular payments transferred to an account in the country where you have retired.
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.
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.
OFX offers services that can help with managing your cash flow, getting good exchange rates, and planning a currency strategy that reduces your exposure to currency fluctuations. Using a
Forward Exchange Contract, you can secure an exchange rate for up to 12 months so you know exactly what rate you will be paying no matter how the markets move. Alternatively, you can use a Limit Order to transfer your funds only when the rate is right.
It is free to sign up with OFX and our 24/7 customer service team is on-hand to help you with all your transfers day or night. With OFX, you can keep more of your hard earned retirement funds.
Sources
© 2018. CanadianForex Limited trading as OFX or its affiliates. All rights reserved. OFX is the registered trade name of CanadianForex Limited.
CA
AU
HK
NZ
SG
UK
US