Transferring Your UK Pension To Australia - Jason O'Connell

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Transferring your UK pension to Australia.

Jason O'Connell is an Authorised Representative (“AR”) 1269423 Shartru Wealth Management. ABN: 46 158 536 871 operating in Australia under AFSL: 422409. Information in this guide is general advice and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.

Don't dream of financial freedom.

Plan for it to happen.

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Have you worked in the UK and are now settled, or planning to retire in Australia?

Then you'll need to know what your UK pension is worth and whether transferring it to Australia is the right option for you. This guide will help you understand what you need to do to get the most out of it.

For many people, their UK pension is the biggest security they have. The lynchpin for a comfortable, worry-free retirement. That’s why it’s so important to get expert advice and discover the best solution for you, personally.

Cross-border UK pension transfers are so complex, there is no one-size-fits-all strategy.

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You see, even if you know the transfer value of your UK pension or the value of any guaranteed income for life (defined benefit/final salary scheme), understanding how that impacts your retirement lifestyle is another matter altogether. Your circumstances are unique and your retirement outcomes depend on them.

These include: Where and when you retire What taxation is applied Investment returns achieved How long you live How you plan on spending your retirement Who you leave behind Exchange rate if your savings are in GBP You should also consider the type of scheme your pensions are held in, where they are, whether you transfer them to another country, and how you draw benefits from them. All of these could have a significant bearing on the value of your UK pension and, more importantly, your retirement lifestyle.

It’s these complex and intertwined considerations that could mean the difference between early retirement or working until you are 70 (or even older).

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Cross-border security in a global economic backdrop of uncertainty.

The last 12 months have brought a lot of uncertainty into many people’s lives.

Even amid more historically certain macroeconomic environments, crossborder retirement was a complicated process. Yet many, many expats did it and will continue to do it.

There now exist new opportunities for investment, and relocating, while policy and social matters may be debated and evolve. For instance, migration is a key tenant of Australia’s economic strength

and stability and normally stringent quotas have in fact not been met through the COVID-19 pandemic – the shortfall will need to be made up in the coming years.

Furthermore, the last year has taught everyone the important of strategic and robust financial planning.

Retirement is about looking forward with no worries and no concerns, and as the world’s economies begin their next cycles, a clear and personal plan of action will give you the reassurance you need.

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Fear of not doing the right thing, or of doing nothing at all.

It’s human nature to be fearful of something you don’t fully understand and to avoid making any tough decisions. It’s scary making such a major financial decision, one that could change your life. So, it can be really reassuring just to have all the pros and and cons explained by an impartial professional who has done it all before and knows what they are talking about.

Speaking of which...

Fear of poor, unqualified advice.

We all want to have a fulfilling retirement, with no money worries. But you’re in a unique position, with unique needs. And that’s why it’s vital to make sure you get financial advice from authorised (Australia and UK) firms/advisers. By doing this you can sleep soundly knowing that you will be afforded the highest level of consumer protection coverage in both jurisdictions.

Authorised firms and advisers work under two of the most financially consumer-friendly countries in the world. Both the UK and Australia have very strict regulations protecting investors and how they can be contacted by advisers. That’s why you will never receive a cold call from a firm or adviser licensed by the Financial Conduct Authority (FCA) in the UK.

How will my UK pension work in Australia?

Income, including pension income is normally liable to income tax in the UK while Australia operates a worldwide taxation system. This means that, as an Australian resident any income you receive, including from a UK/Foreign pension, is assessable for income tax in Australia.

Understanding how you will be impacted and planning accordingly could make a difference in the real value to you, of your UK pension income in retirement.

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Exchange rate fluctuations. Will this affect my standard of living?

Many people don’t immediately realise this, but it soon becomes one of their biggest concerns. What if my money becomes worth less? For individuals retiring with foreign pensions, assets or rental income, currency fluctuations introduce a whole other layer of risk to your retirement planning. For example, on 24th September 2001, £1.00 was worth A$3, versus A$1.44 on 26th March 2013, and went from being worth over A$2.00 in the lead up to the 2016 EU referendum, to A$1.60 within 4 months of victory for Leave EU. Managing that kind of risk could have a material impact on your standard of living in retirement.

Even if the best thing for you is to leave your pension in the UK, there are international UK pensions for non-residents, which offer multi-currency options to help manage your risk to currency fluctuations. Part of any holistic retirement plan for someone with retirement provisions in more than one currency should include a decumulation strategy to mitigate some of the risks of currency fluctuations where possible.

Legacy - what happens if you die before you get to enjoy your hard-earned pension?

While retirement is the time to kick back and truly take control of your life, deciding how much you work (if at all) and how you spend your time needs careful consideration. However, long you live is the one thing nobody can be certain about.

While you may not be planning on leaving behind a lot of wealth, it’s important you understand what happens to the wealth that outlives you. The type of pension you leave behind and how it is structured will dictate: - whether it can be distributed - whether it will be received as a dependent’s pension or a lump sum - who can benefit from it and when - how any distribution might be taxed Without appropriate planning, your pension may not be inheritable at all, or may not be distributed in the most appropriate way to meet the needs of your beneficiaries.

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Why do I need a highly qualified financial adviser to help me transfer my pension?

The short answer is to enjoy a retirement free from worry and full of fulfilment. And it’s really hard to do this if your money income isn’t secure and you don’t have a flexible and strategic plan. Nobody wants to spend their golden years scared of incoming economic downturns or not knowing what the future holds.

The knowledge gap Jason’s experience has proven the knowledge gap between professional advisers and clients is one of the key components underpinning an advisers’ duty of care for clients.

Experienced and qualified financial planners have the advantage of knowledge, practical experience, and confidence built up over many years and many qualifications. There are rules and regulations in place outlining how financial professionals treat clients covering such areas as transparency, disclosures, conflicts of interest and being fair and balanced.

"Knowledge empowers people with our most powerful tool: the ability to think and decide."

Seymour Simon

Everybody wants to bridge the knowledge gap. There is a growing trend for people to seek out knowledge and information themselves. They are tending to engage advisers as a sounding board and a critical eye - to provide the expertise to reaffirm their findings or add the value of their knowledge/experience to their situation.

Equally, financial professionals want to offer education, coaching and empowerment to set up clients to think and decide for themselves: better informed clients generally make better decisions about everything in life, which improve their outcomes.

The value of advice According to Vanguard research, 'advisers may potentially add “about 3%” in net returns' - you can read the full research here.

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About Jason O'Connell An Irish expatriate and Australian resident, Jason O’Connell is the leading life and retirement financial planner for British and Irish and expatriates living in Australia.

Jason gives his clients the confidence to dream big – and make those dreams materialise. He provides a new perspective on retirement, a fresh way of thinking and an out-of-the-box approach to financial planning that is proven to work. He wants to understand your future intentions and do what it takes to help you make them happen.

Qualified Australia Advanced Diploma of Financial Planning Self Managed Superannuation Fund Adviser (Personal Advice) Financial Adviser Exam - FASE Standards Authority Diploma of Financial Planning UK & Ireland UK Level 6 Pension Transfer and Planning Advice – CISI Pensions and Retirement Planning – CII QFA Diploma Qualified Financial Adviser LIA UCD

Current roles Authorised representative (“AR”) 1269423 Shartru Wealth Management operating under AFSL: 422409 since 2020 Founding Director of Imperius Wealth regulated by the Central Bank of Ireland C50457 since 2008 Founding Exe-board member (currently serving as secretary) of Federation of European Independent Financial Advisers (FEIFA.EU) since 2009 9

How it works

Working with Jason

1. You’ll get to know each other Before Jason can help, he needs to understand your unique financial story. He’ll need to learn all about you, your lifestyle and your future goals. While Jason has a lot to say on many topics, he’s a great believer in practicing the saying of Greek philosopher Epictetus, ‘We have two ears and one mouth so that we can listen twice as much as we speak”. In order to establish what really matters to you so he can help you to make it all happen, he’ll ask the questions that help you unlock big dreams and aspirations – dreams that you might think are currently impossible, and aspirations that you may never put your finger on before.

In this assessment phase, Jason will ensure you both have a firm grasp on your priorities, current income, savings, expenses and debts and what needs to be done be to ensure you make the important things in life happen.

2. Together, you’ll create a vision for your future Perhaps the most important part. Jason helps you to clearly list and prioritise your future dreams and aspirations. You’ll know where your retirement will take you.

What you want to achieve. What a fulfilling and purposeful life in retirement means to you. Then, working closely with you, he’ll model a wealth map to execute, including short and long-term tangible plans and financial goals, that you can approach with confidence and clarity.

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3. He'll overcome the obstacles Life throws all kinds of challenges at us every day, roads to navigate, problems and puzzles to solve. But the good thing about a problem, is that there’s usually a solution. As an expatriate and Australian resident himself, Jason understands the complexities of moving a family to the far side of the world, and the hurdles and surprises you might encounter during the process. Along with being highly qualified and experienced, this puts Jason in a unique position to help expatriates navigate challenges, identify opportunities, and make efficiencies along their own journey.

4. He'll identify the best solution Jason believes in pushing the envelope. His vast experience and intricate knowledge of the unique expatriate retirement landscape means Jason delivers inventive financial plans, individually tailored to your circumstances. Jason’s plan for you will promote efficiency and deliver the best retirement for you. You’ll know that no stone has been left unturned in finding the right solutions to the individual challenges you face.

5. He’ll be with you through it all The best laid plans are those that are flexible, adaptable and able to deliver through life’s ever-changing dynamics. Creating your plan is just the start. After this, Jason will help you monitor its successes, constantly looking ahead to mitigate the potential shortcomings of any unexpected events. How well your plan is adapted and executed over time, will have just as much impact on the outcome as the initial planning itself. This ongoing support and guidance is what gives every client Jason works with a deep sense of reassurance that they can continue to achieve the retirement that makes the things that are important to you happen.

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Real life scenario

Jason's approach to modeling Jason uses Cashflow modelling (CFM) to simulate and forecast the potential difference between a client transferring their UK pensions into Australia and leaving them as they are in the UK. He does this to make sure you have a very clear and detailed overview of all your options.

Because we are all living longer, and retirement can last several decades, we run simulations to age 100 to find ways to ensure you “don’t outlive your money”.

CFM incorporates information from your financial situation such as current assets and additional planned savings between the present time and your retirement (based on robust current and future value income and expenditure). There are several assumptions used, which are driven by the UK regulator, such as inflation and investment returns. These are all based on linear growth rates which we then overlay with stress testing for events. such as a Global Financial Crisis (GFC).

The following page shows how Jason’s advice process using modelling helped his clients achieve a dream that they thought was out of reach

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Meet Ian and Cindy* Aged 55 years - Brisbane, Queensland Ian moved to Australia 9 years ago and met his wife, Cindy. Ian worked with one UK employer for 16 years, and had a defined benefit pension built up. It offered a guaranteed annual income of circa £6,500 for life from age 65 (indexed from the date he left this employer).

Ian and Cindy were renting and, although they had saved a house deposit, they were reluctant to use all their savings. Their fear was that they wouldn’t be mortgage debt free and able to retire comfortably when Ian hit 65.

After some initial conversations with Jason, Ian started to feel confident as he learnt more about his UK pension, his options, the risks of transferring, and the potential benefits of transferring.

*names changed for privacy reasons.

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Scenario 1

Savings over time if pension left in UK Below is a forecast showing their savings position to age 100 if Ian were to leave his pension in the UK, drawing an income into Australia from the UK, which would be liable to income tax. The dip in saving values at 65 years is due to the outstanding mortgage being repaid.

This simulation shows that if he doesn’t transfer his UK pension, he may not have enough money to achieve his goal of retiring at 65.

Jason’s modelling made it very clear for Ian to see that transferring his pension to Australia could help them achieve their goals, and keeping his pension in the UK could not. The transfer meant he could purchase a new home, retire at 65, and clear the family’s outstanding mortgage.

So, not only could Ian and Cindy achieve their goal of home ownership, but they could be debt free when Ian reached 65, and looking at a very comfortable life together in retirement.

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Scenario 2

Savings over time if UK pension transferred to Australia and new home purchased The simulation below is a forecast of their potential savings based on a UK balanced sector investment return profile over the next 30 years, and shows their savings over time based on transferring Ian’s pension to Australia, making a property purchase at age 55, and investing in line with their risk profile (balanced).

The dip in saving values at 65 years is due to the outstanding mortgage being repaid.

As you can see, the potential value of savings is over $600,000 higher at aged 65 than it would be if he were to leave his pension in the UK. Market risk is reflected in this simulation, with the fluctuating value representing volatility in investment markets.

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What Jason's clients have to say Moving five separate pension funds from the UK to Australia is a complex and bureaucratic process. Jason guided me through this with knowledge, energy, and balance. I have been very confident of his approach, which has been well-informed and comprehensive.

- Brett S, Sydney, NSW

It was apparent from the beginning that you’re an expert, and I knew early on that I was comfortable dealing with you. Before talking to you I never realised what was involved in moving a pension from one country to another, and what my options were. You helped me understand what was involved, and that moving my UK pension to Australia was the way to go. Now that we know what our financial position really is, we’ve even been able to buy a new home.

- Karl B, Brisbane, QLD

I did look around at a few companies but they weren’t all suitably qualified to look at transferring my UK pension from both the UK and Australian sides of the transaction.

I’m happy I went with you - it’s been managed very well.

I’ve been able to have regular contact with one person who really understood my situation.

- Steven S, Mill Park, VIC

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Is it time to start your journey?

Unfortunately, not every expatriate aspiring to retire in Australia can work directly with Jason, as he provides a very bespoke service that invests a lot of time in planning his client’s future happiness.

If you’re serious about getting the most out of your retirement in Australia and want to find out more about working with Jason, reach out to him today.

W. www.jasonoconnell.com.au E. jason.oconnell@shartru.com.au T. 1300 478 424 M. +61 (0) 498 740 840 A. 1/50 Yeo Street, Neutral Bay, NSW 2089

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www.jasonoconnell.com.au The Case Study is illustrative only and is not an estimate of the investment returns you will receive the fees and costs you will incur. This case study is based on the following assumptions: a) based on the male client being 55 in 2019 year with a starting balance of $644,322 using an inflation amount of 2.5% and real returns of 2.5%; b) 2019 underlying fees, costs and taxation rates used; and c) both clients retire at male clients 65th Birthday.

All figures displayed are in today's terms.

Currency rates within this article are as per poundsterlinglive.com The report contains a lifetime Cash Flow forecast. This analyses incomes, expenditures, savings and investments to illustrate whether certain financial objectives are achievable, and how certain decisions regarding your finances will be likely to affect you many years down the line.

Throughout this report many assumptions have been made, including the anticipated rate of inflation and an estimated investment return rate, as well as the current tax position. In reality, these figures may fluctuate and have a significant impact on your finances in comparison to those shown. We recommend clients regularly review the assumptions made in this report for the most accurate forecast.

The information contained in this report is general information only, and is not intended to be legal, taxation or financial advice. Persons acting on any matter covered in this report should seek independent professional advice on the application of the matter to their individual circumstances.

Jason O'Connell is an Authorised Representative (“AR”) 1269423 Shartru Wealth Management. ABN: 46 158 536 871 operating in Australia under AFSL: 422409. Information in this guide is general advice and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.