UK Pension Expertise

How we can help

SMSF Alliance assists with transferring UK pension benefits to Australia by providing QROPS-compliant SMSF deeds, specialised minutes, and HMRC reporting for ongoing administration. To act in connection with a Qualifying Recognised Overseas Pension Scheme (QROPS), a scheme manager must satisfy HMRC’s “fit and proper person” standard, which considers character, knowledge and professionalism. SMSF Alliance, via our Head of Technical, Debbie Thomas LLB, was one of the first Australian providers to notify HMRC that its scheme meets the recognised overseas pension scheme conditions and to appear on HMRC’s published QROPS list, and we continue to pass annual due diligence checks.

The organisation does not arrange physical fund transfers but maintains alliance partners for this purpose. For individual clients without financial advisers, the firm offers introductions to advisers with appropriate UK pension expertise.

The UK regulator

HMRC administers pensions and taxation within the UK. Non-UK residents transferring funds to Australian super funds still incur UK reporting and tax obligations that extend for many years after the funds’ transfer. These obligations depend on transfer timing and how long individuals have been non-UK residents.

Unauthorised UK pension transfers — such as transfers to non-approved funds — may incur UK tax of up to 55 per cent of the transfer balance. However, the transfer of benefits from a UK pension scheme to a foreign super fund can be arranged to avoid the payment of UK tax at the time of transfer if it is done correctly.

Before a UK pension scheme transfer can occur, the receiving SMSF must be a Qualifying Recognised Overseas Pension Scheme (QROPS). QROPS requirements include providing ongoing HMRC reporting and restricting benefit payments to members aged 55 or older, except in cases of ill-health retirement.

Age 55 restriction

Australian superannuation legislation permits benefit releases before age 55 in specific circumstances, such as severe financial hardship or compassionate grounds. However, funds seeking QROPS inclusion must limit benefit payments to members aged 55 or older. This restriction explains why there are almost no APRA funds offering this facility — the market size is insufficient to warrant offering a suitable product.

Currently, a couple of hundred Australian super funds appear on the QROPS list; all except one are SMSFs with an age 55 or older membership restriction. In line with the increase to the UK Normal Minimum Pension Age, this minimum age will rise from 55 to 57 with effect from 6 April 2028. From that date, a scheme’s rules must not permit payments to members under age 57 other than on grounds of ill-health (or where certain permitted lump sums are paid).

What types of pension interest can be transferred?

Three common UK pension arrangements exist:

State Pension
Defined benefit schemes
Defined contribution schemes

Individuals cannot transfer State Pension rights or unfunded defined benefit scheme interests (such as NHS Pension Scheme benefits) to a QROPS. Members of funded defined benefit schemes may transfer the cash equivalent value, though the scheme may refuse the transfer. Where safeguarded benefits (such as defined benefits) exceed £30,000, the member must first obtain advice from a UK-regulated financial adviser before the transfer can proceed. For practical purposes, the most common transfer requests relate to defined contribution schemes.

UK tax year

UK pension transfer timing and ongoing reporting obligations align with the UK tax year, which commences on 6 April each year and ends on 5 April of the following year.

Overseas transfer charge

An overseas transfer charge of 25 per cent of the amount transferred may apply to transfers requested on or after 9 March 2017. Following the changes that took effect on 6 April 2024, the charge can now arise in two circumstances:

Residency — where the individual transferring the funds is not a tax resident of the country in which their QROPS is located; or
Overseas Transfer Allowance — where the amount transferred exceeds the individual’s Overseas Transfer Allowance, which is £1,073,100 unless a higher protected allowance applies.

Where a transfer is made to an Australian QROPS by an individual who is an Australian tax resident, and the amount transferred is within the Overseas Transfer Allowance, no overseas transfer charge is payable. Where the allowance is exceeded, the 25 per cent charge applies to the amount of the excess.

The basis for the Australian exemption — that transfers to a QROPS established in the country in which the member is resident are excluded from the charge — continues to apply. In the Budget of 30 October 2024 the UK Government removed the equivalent exclusion for QROPS established in the European Economic Area (EEA) and Gibraltar, but this change does not affect transfers to Australian QROPS made by Australian residents.

If an individual transfers a UK pension interest to a QROPS in their country of tax residence but then ceases that residency before five full UK tax years have elapsed after the tax year of the transfer, the overseas transfer charge can become payable retrospectively. As UK tax years run from 6 April to 5 April and the period only starts counting from the end of the tax year in which the transfer occurred, the real-world exposure is five to six years — a little over five for a transfer made late in a UK tax year, closer to six for one made early.

Payment of UK tax

Former UK tax residents can generally access UK benefits from age 55 upon retirement, or earlier in cases of ill-health retirement. Benefits transferred to an Australian QROPS become subject to Australian preservation rules.

For UK tax purposes, benefits must typically be used to provide a retirement income stream, such as a lifetime annuity or a flexi-access drawdown fund (similar to an account-based pension). A lump sum of up to 25 per cent may generally be withdrawn as a “pension commencement lump sum” free of UK tax, subject to the Lump Sum Allowance of £268,275 introduced on 6 April 2024.

When an Australian tax resident commences account-based pension income from a QROPS, Australian tax laws apply. Importantly, where an income stream is paid to a person aged 60 or older, it is exempt from Australian tax. The double tax agreement between Australia and the UK ensures taxation occurs only in the country of residence. Therefore, former UK residents aged 60 or older and resident in Australia avoid both Australian and UK tax on QROPS income.

However, lump sum withdrawals exceeding the 25 per cent limit may incur UK taxation. Depending on the nature of the withdrawal, the amount withdrawn may be taxed in the UK at a rate of up to 55 per cent. UK tax applies only to withdrawals made within specific time frames.

UK transfer occurred before 6 April 2017

For UK pension interests transferred before 6 April 2017 to an Australian QROPS, any lump sum withdrawal faces UK tax if the individual currently is, or has been, a UK resident for tax purposes during the previous five full UK tax years.

UK transfer occurred after 5 April 2017

Transfers remain subject to UK tax if either condition applies:

At the time of withdrawal or rollover from the QROPS, the individual currently is, or has been, a UK tax resident during any of the previous 10 UK tax years; or
Five years have not yet elapsed since the funds were transferred to the QROPS from the UK pension scheme.

Once these time periods elapse, benefits may be withdrawn from a QROPS (subject to Australian preservation rules) or rolled over to a non-QROPS fund without ongoing UK tax obligations, except in relation to taxable property investments. Australian tax continues to apply, especially for members under age 60.

Taxable property

Money transferred from a UK pension scheme must not be invested in “taxable property”. This rule applies regardless of transfer timing or how long the individual has been a non-UK tax resident.

Taxable property encompasses residential real estate investments, holiday homes, timeshares, and personal-use assets including artwork, antiques, jewellery, cars and boats.

Ongoing HMRC reporting

Australian super funds listed as QROPS must provide ongoing HMRC reporting. Generally, QROPS and former QROPS funds must report withdrawals, rollovers and certain other events during these periods:

Within 10 years of funds being transferred to the QROPS from the UK scheme.
At any time if the benefit recipient is currently a UK tax resident.
For transfers before 6 April 2017 — at any time when payments are made to individuals who were UK tax residents during the previous five full financial years.
For transfers after 5 April 2017 — at any time when payments are made to individuals who were UK tax residents during the previous 10 full financial years.

QROPS trustees must also report changes regarding fund or member details, cessation of QROPS status, taxable property investments, or member residency changes within the prescribed periods. When commencing member pension payments, only the first payment requires reporting.

Mingling UK and Australian super benefits

Individuals with UK benefits in a QROPS may wish to roll existing Australian super benefits, or make future contributions, into their QROPS. HMRC has indicated that it will treat benefits withdrawn from a mingled QROPS as “first coming from the UK-sourced benefits”, potentially creating complications if individuals wish to withdraw Australian-sourced benefits while still within a UK reporting period.

Although HMRC’s jurisdiction over the ordering of super benefit withdrawals may be questionable, mingling could produce unintended consequences. The problem compounds where a QROPS includes benefits transferred both before and after 6 April 2017, potentially warranting a separate QROPS for each tranche of benefits.

Tax

UK pension funds constitute foreign super funds subject to special Australian tax treatment upon transfer to an Australian super fund. Transfers occurring within six months of an individual becoming an Australian tax resident are tax-free from an Australian perspective.

Transfers to an Australian super fund (QROPS) count against the non-concessional contribution cap. However, where a transfer occurs more than six months after Australian tax residency commences, the growth between becoming resident and the fund receiving the money becomes taxable as “applicable fund earnings”.

These earnings form part of the individual’s assessable income, taxed at marginal rates. Alternatively, the individual may elect (via ATO form NAT 11724) to have the applicable fund earnings taxed within the QROPS at 15 per cent rather than at marginal rates. The election form must accompany the fund transfer.

Applicable fund earnings form part of the individual’s taxable component but are not counted against the concessional contribution cap.

Non-concessional contribution cap

UK pension fund transfers count against the individual’s non-concessional contribution cap, either partially or fully — specifically, the transferred amount less any applicable fund earnings where an election is made.

The non-concessional contribution implications require careful consideration. Age 75 is a hard deadline: a fund can only accept a non-concessional contribution — which includes the non-concessional portion of a UK transfer — up to 28 days after the end of the month in which the member turns 75. After that, the transfer cannot be accepted at all. No work test applies; the work test is relevant only to claiming a tax deduction for personal contributions, not to the acceptance of non-concessional contributions.

Individuals under 75, with a total super balance below $1.84 million at the previous 30 June, may contribute up to three times the annual non-concessional cap of $130,000 over three years ($390,000 for 2026/27); the bring-forward tiers step down as the total super balance approaches the general transfer balance cap. Those with a total super balance of $2.1 million or more cannot make non-concessional contributions, so a UK pension scheme transfer becomes impossible.

A transfer that exceeds the non-concessional cap can create unintended UK tax consequences, as any subsequent withdrawal of the excess non-concessional contribution may give rise to an unauthorised (UK) payment taxed at 55 per cent of the transfer balance. Withdrawing sufficient other Australian super to cover the excess non-concessional contribution and associated earnings may alleviate this issue.

For individuals likely to exceed the non-concessional cap, splitting UK benefits across separate accounts (using multiple Self-Invested Personal Pensions) and drip-feeding QROPS transfers over time is a viable option.

Exchange rate

Transaction timing for favourable exchange rate advantages often matters. The ATO’s 2015 Interpretative Decision ID 2015/7 specified that the exchange rate applicable at the time of receipt in Australia of the transferred funds is used to calculate applicable fund earnings and the Australian taxation consequences.

Finally

UK pension benefit transfers to Australia involve the complex interaction of both Australian and United Kingdom law. Beyond the age 55 restriction, factors including the non-concessional contribution cap, the Overseas Transfer Allowance, and potential ongoing UK reporting and tax consequences require careful consideration.

Interested parties should contact Debbie Thomas at customercare@smsfalliance.com.au for further consideration of our services.

This information is general in nature, reflects the rules as at July 2026, and does not constitute financial or tax advice.