Moving to UK Soon - How to Play The Pension Game?

Hi all,

I am an Australian PR. I recently received a job offer from UK for which I am going to relocate to UK for two years. I do have some saving in AUS as well as a few years of contributions in a superfund, Unisuper. Now, I understand that Unisuper is performing rather well, so my default choice would be to simply move all money into the accumulation component and let the managers do their job.

However, I understand that Unisuper is not in the QROC list compiled by the UK government, and therefore I will be unable to bring my UK pension into that fund.

This led to a broader speculation on the topic of pension optimization.

was considering either opening a SMSF with a cheap provider (stake.com.au), or identify a Superfund in the QROC list which will allow me to concentrate pensions into one single fund. I have several questions

1) for expats that know the UK pension system, what is the most efficient way to cut my income taxes (salary sacrifice? ISA funds?) and what fund do you use to bring your pension back to AUS?

2) What is the best super allowing for self-investment? I would like to invest my Australian super in a 3-4 ETFs while I'm abroad

thanks

Comments

  • +2 votes

    1) for expats that know the UK pension system, what is the most efficient way to cut my income taxes (salary sacrifice? ISA funds?) and what fund do you use to bring your pension back to AUS?

    You can bring your UK super back but at the very end of your assignment when you move permanently back. No point doing it before that. Salary sacrifice is only into pension, ISA you pay into with your after tax money.

    2) What is the best super allowing for self-investment? I would like to invest my Australian super in a 3-4 ETFs while I'm abroad

    No such thing as best. If you regular invest look at interactive investor (ii.co.uk) or execution only something like x-o.co.uk

    •  

      You can bring your UK super back but at the very end of your assignment when you move permanently back. No point doing it before that. Salary sacrifice is only into pension, ISA you pay into with your after tax money.

      Are you able to elaborate on this? I left the UK at the beginning of 2020 after working there for 2 years, during which I paid into a Pension Fund. Is there an easy way to access these funds so that they can be transferred to an Australian Superannuation account?

      • +2 votes

        The UK tax office HMRC calls the list QROPS compliant funds. Basically you can transfer but there is specific rules the funds have to abide by around access (our covid withdrawals are not allowed etc). The rules are complex and most Australian funds or advisers know nothing.

        Last time I checked Australian super is in that QROPS list, so is a few other industry super funds. Google for the latest list.

    •  

      Hey Netjock,

      thanks for the post. Great advice. It looks like you have a great knowledge of the subject, so I would like to ask you to elaborate a bit more on your experience on how to be tax efficient while temporarily living in the UK, if you don't mind.

      I confirm I am a regular investor (with my primarily trading account on Interactive Brokers), mostly long on stocks/options but sometimes also write options and trade futures. Hence, I would be happy to have as much control as possible of my own funds.

      I checked the website you kindly suggested. I imagine you're referring to their SIPP option, is that right? I would have to then move the SIPP pension back to Australia. I also checked the QROPS list and it appears there is only ONE australian retail found on their list, the Australian expat fund, which is not really giving much information about their investment strategy.

      thanks

      • +1 vote

        No such thing as tax effective living in the UK. Income tax is high. But you can put GBP40k a year into your pension.

        This summary of SIPP charges by provider should help you figure out what you want to do

        I also checked the QROPS list and it appears there is only ONE australian retail found on their list, the Australian expat fund

        If you're a serious investor then potentially look at making your SMSF a qualifying QROPs. Maybe something to look into, I have never looked into it.

        ISAs are after tax (so it isn't tax efficient) but when in ISA the UK government sees it as tax free. Australian government doesn't see it the same way I must warn (which means if you are coming back it isn't tax efficient).

        •  

          Thanks a lot Netjock, good to know.

          I will diligently look at the material you kindly provided. The possibility to contribute up to 40k in pension doesn't sound bad, as I understand the UK pension system will top up contributions. Correct me if I am wrong, but it seems to me a good option to enhance pension contribution (and invest that amount via a SIPP) to offload the marginal tax load.

          Relative to ISA, the idea of not paying tax on CGE up to the threshold sounds great. Assuming I won't spend that money until I come back to Australia, I will have to declare it and pay taxes on it? What if I spend them?

          Sorry for all the questions, I'll check your links now

          • +1 vote

            @arkhos:

            40k in pension doesn't sound bad, as I understand the UK pension system will top up contribution

            40k gross. Therefore if you get taken from your pay packet it is better. If you pay from your after tax it only gets topped up at 20% and the difference if you are on higher rate taxes is refunded when you put in your tax return. Your employer should be able to deduct it like we do here in Oz.

            Relative to ISA, the idea of not paying tax on CGE up to the threshold sounds great. Assuming I won't spend that money until I come back to Australia, I will have to declare it and pay taxes on it? What if I spend them?

            You have to value it when you become tax resident here if your $1 grows to $1.50 when you become tax resident anything above $1.50 you need to pay cap gains. Also need to pay tax on dividends.

  •  

    With my UK pension, I'm paying 0.13% in admin and management fees. It is significantly more for AusSuper here. Both pension and AusSuper are actively managed as well.

    •  

      Are you using a SIPP? In which case, what provider?