6 Month Window for UK Pension Transfers to Australia

For many years UK pension fund members migrating to Australia have been in a dilemma as to whether or not to transfer their funds to Australia within 6 months of their arrival.
Some key announcements by Her Majesty’s Revenue and Customs (HMRC) on the QROPS rules governing the tax on transfer means that pre-departure pension advice is essential, says the UK’s pension transfer pioneers, Montfort International plc.

UK Rules Effecting Australian Pension Advice

Before an HMRC announcement on 12th January 2009 it was understood that many people transferring their UK pensions to Australia, after 6 month window of arrival in Australia, could face a UK tax charge on their Australian taxes if the tax was paid by the Australian superannuation scheme. In addition, this charge would be regarded as an unauthorized payment from the Australian scheme.
This meant that the tax on growth after transfer which the UK pension member would need to pay could not be paid by the scheme in many cases without breaching UK QROPS rules. This meant that the member would have to pay tax out of their own pocket at a potentially higher rate.
The HMRC announcement on 12th January 2009 has clarified that tax paid by the scheme, in respect of the 6 month window for transfer being passed, is no longer an unauthorized payment.
As a result of this announcement an individual transferring to Australia is no longer under pressure to transfer their UK pension to an Australian Superannuation scheme soon after arriving in Australia and can look to transfer when the exchange rate is preferable.

Grand-kids in Oz?

The following question was recently directed at the Daily Mail’s Moneydoctor.
When my first grandchild was born almost 5 years ago, my son opened a high savings account for her and ever since I have been paying £10 a month into that account. Hopefully that will mount up over the years, especially as she will not be paying tax on the interest for some time.
Last December my second grandchild was born and I would like to do the same for her. However, she lives in Australia, so what would be the best way to get money into an account for her?
Geraint Davies of IFA Montfort International, which specialises in advice for people going to live or work in Australia, advises:
It is risky to send currency through the post and the cost of converting £10 a throw into Australian dollars will eat into most if not all of the gift.
One practical solution is to open an account here for her and let the £10 a month grow here into a more sizable sum that you can then remit to Australia. Alternatively, offer to pay any UK accounts for your own child and ask them to pay the amount in A$ into your grandchild's account.
Any grandparent in your situation should remember that their grandchild, as a permanent resident in Australia, is also a tax resident and this needs to be factored in either if sending money or indeed setting up a UK account in trust for him or her.
The applicable tax rate at the moment is a zero rate up to A$416pa, followed by a band up to A$1307pa where the rate is 66%. The effect of averaging brings this up to 45% on the total interest earned, which the rate for income over A$1307.