UK Pension for Expats in Australia: Everything You Should Know

In this guide, we’ll explain the process of claiming a UK pension for expats in Australia and transferring your pension to an Australian scheme. We’ll outline relevant eligibility criteria, available transfer options, and associated tax implications, enabling UK expats in Australia to make informed decisions and ensure long-term financial stability in retirement.

Overview of the UK Pension for Expats in Australia

Relocating to Australia does not negate your claim to UK pensions, regardless of the type of pension you’re entitled to. UK expats in Australia can either claim or transfer their UK pensions to Australia, depending on the pension type.

The UK pension system comprises three main pension types:

• State pensions
• Defined benefit pensions (final salary)
• Defined contribution pensions (personal or workplace pensions)

UK pensions can be retained while living abroad, and you can resume contributions while living in Australia, assuming your pension provider allows it and you’re a relevant UK individual.

A relevant UK individual is defined as a person who meets at least one of the following conditions:

• Has UK earnings subject to UK income tax in the current tax year
• Is a tax resident in the UK
• Was a UK resident in one of the previous five tax years and contributed to a UK-registered pension scheme during that period
• Is a Crown Servant, or the spouse or civil partner of a Crown Servant, with relevant UK earnings

Contributing to your UK pension as an expat in Australia can be an effective strategy to enhance your retirement savings. However, claiming tax relief on voluntary contributions depends on your UK residency status and income.

Relevant UK individuals earning £3,600 or more annually may be eligible to claim tax relief on contributions up to 100% of their UK earnings (subject to the annual allowance) and up to £3,600 for the next five years.

Those earning £3,600 or less are limited to tax relief on contributions up to that amount. Non-relevant UK individuals are not eligible for tax relief on voluntary pension contributions.

Can You Claim Your UK State Pension in Australia?

The UK state pension is a regular payment made by the government with the goal of providing financial support during retirement.

You are generally able to receive a UK state pension in Australia if you meet specific eligibility criteria regardless of your current location:

1. Age
2. Sufficient National Insurance contributions

Age

You become eligible for the state pension once you reach a certain age, determined by your date of birth. To apply for your UK state pension in Australia, you must be within four months of your state pension age.

The table below outlines when you will reach the state pension age according to your date of birth:

According to the changes to the UK state pension system introduced on 6 April 2016, individuals who reach the state pension age on or after this date will receive a new, flat-rate state pension.

The new state pension replaces the old system, which consisted of a basic State Pension and Additional State Pension. Those who reached the pension age before 6 April 2016 will still receive their pension under the old system.

Sufficient National Insurance Contributions

The UK state pension system is based on National Insurance contributions, which are mandatory payments made by individuals in the UK if they are:

• Over the age of 16
• Employed and earning over £242 per week from one job
• Self-employed and earning over £12,570 per year

To qualify for any state pension, UK expats must have at least ten qualifying years of National Insurance contributions. Qualifying years refer to the years during which expats have:

• Worked and made National Insurance contributions
• Received National Insurance credits in special circumstances such as taking care of a child or being unemployed
• Paid voluntary National Insurance contributions

Expats with ten qualifying years of National Insurance contributions will receive £63.20 per week. Individuals with 35 qualifying years will receive the full amount of the UK state pension, which is currently £221.20 per week or £11,502.40 per year.

UK expats claiming the state pension while residing in Australia face a critical limitation—their pension payments are ”frozen” at the initial rate received, with no annual inflationary increases or upratings applied thereafter.

Why Are UK State Pension Payments “Frozen” in Australia?

Unlike in countries with reciprocal uprating agreements with the UK—such as Switzerland and EU and EEA member states— state pension payments to expats living in Australia are “frozen” at the amount they were first eligible for, with no future cost-of-living or inflationary increases applied.

Until 2001, the UK-Australia Social Security Agreement facilitated mutual recognition of contributions and limited coordination of benefits, including the annual uprating of UK state pensions for expats in Australia.

However, Australia decided to end the agreement following the UK’s refusal to apply indexation to UK pension payments in Australia.

While you can still claim your UK pension benefits as an expat in Australia, the absence of annual upratings may significantly erode the value of your pension income, leaving it increasingly vulnerable to the effects of inflation.

How Can UK Expats Claim Their State Pension in Australia?

If you meet the eligibility criteria, you can claim your state pension in Australia by contacting the International Pension Centre and providing the required personal details and your National Insurance number.

You can receive your state pension in your personal, joint, or someone else’s UK bank account as long as you have the necessary permissions.

If you’d like to receive your pension in an Australian bank account, you’ll need to fill out the international claim form (IPC BR1 form) and send it to the International Pension Centre. You must also provide your international bank account number (IBAN) and the Business Identifier Code (BIC).

The pension is paid out in GBP, but you will receive it in the local currency, so the benefit amount you receive may vary due to exchange rates.

You can choose to receive your state pension funds every four or 13 weeks. If your state pension is less than £5 per week, you’ll receive the payment once a year in December.

What Are the Tax Implications for UK State Pension Holders in Australia?

Your UK state pension may be subject to taxation in Australia. To determine whether you’ll need to pay taxes on your state pension in Australia, you must first establish whether you’re an Australian resident for tax purposes.

As a UK expat, you’ll be considered an Australian resident for tax purposes if you:

• Moved to Australia and are living there permanently
• Have been in Australia continuously for six months or more, and have worked in one job and lived in the same place during that time
• Have been in Australia for more than six months of the year, unless you don’t plan on living in Australia and have a usual home overseas

If you determine that you are an Australian resident for tax purposes, you will have to:

1. Declare your UK pension income to the Australian Taxation Office (ATO)
2. Include your UK pension income in your annual tax return in Australia
3. Pay income tax on your pension, as Australia considers pensions as assessable income

The table below summarises current income tax rates in Australia:

Is UK State Pension Claimed in Australia Taxable by the UK?

Thanks to Australia’s double taxation treaty with the UK, you’ll generally only pay Australian income tax on your UK state pension if you are considered an Australian tax resident (see earlier section for residency criteria).

Even if you’re liable for tax on certain income in the UK, you may be eligible for a Foreign Income Tax Offset (FITO)—a credit that reduces your Australian tax bill by offsetting the tax already paid on the same income in the UK. This helps prevent double taxation under the treaty framework.

Navigating taxes when claiming your UK state pension in Australia requires a detailed understanding of both countries’ tax systems.

Experts at Titan Wealth International can analyse your unique situation and expat status to prevent double taxation and ensure you comply with Australian tax obligations while maximising your pension income.

Can UK Expats Transfer Their UK Pension to Australia?

UK expats can transfer eligible UK pension schemes to an Australian superannuation fund, provided the transfer complies with both UK and Australian regulations. The process involves strict eligibility criteria and must be carried out between approved schemes.

When executed correctly, particularly with the guidance of a pension transfer specialist, such as those at Titan Wealth International, a pension transfer can be completed with maximum efficacy and minimum loss by converting your pension to AUD at wholesale rates.

Which UK Pensions Can Be Transferred?

The following types of UK pension schemes are typically eligible for transfer to an Australian superannuation fund:

1. Defined benefit pension schemes
2. Defined contribution schemes (including personal, workplace, and stakeholder pensions)
3. Occupational pension schemes
4. Small Self-Administered Schemes (SSAS)

However, certain pensions are ineligible for transfer. These include:

1. State pension (cannot be transferred under any circumstances)
2. Purchased annuities (generally irreversible and not transferable)
3. Unfunded public sector schemes (such as NHS, teachers, armed forces, and police pensions)

Where Can UK Pensions Be Transferred in Australia?

Pension transfers from the UK to Australia must be directed into superannuation with a Qualifying Recognised Overseas Pension Scheme (QROPS) status.

This designation, granted by HM Revenue and Customs (HMRC), confirms that the receiving scheme meets specific requirements set by UK pension regulations.

A QROPS allows UK pension funds to be transferred overseas while remaining compliant with the UK tax framework.

Australian superannuation funds with QROPS status are required to restrict access to the transferred funds until the member reaches the age of 55, in accordance with UK pension legislation.

Transferring a UK pension to a non-QROPS scheme may result in:

In addition, as of 2017, transferring your UK pension to a QROPS in Australia may be subject to a 25% overseas transfer charge (OTC) unless one of the following conditions are met:

• You’re an Australian resident transferring to an Australian-based QROPS
• The QROPS is an occupational pension scheme, and you are employed by a sponsoring employer within that scheme
• The QROPS is an overseas public service scheme, and you work for an employer participating in the scheme
• The QROPS is a pension scheme operated by an international organisation, and you are employed by that organisation

You may also transfer your UK pension to a Self-Managed Super Fund (SMSF). However, such transfers require diligent planning and professional guidance to avoid pitfalls and unexpected tax liabilities. Your SMSF will have to be considered a QROPS and comply with both UK and Australian laws.

Eligibility Criteria for Transferring a UK Pension to Australia

To transfer a UK pension to an Australian superannuation fund, the following criteria must be met:

1. You must be at least 55 years old (exceptions apply for ill health or incapacity)
2. The receiving fund must be a registered QROPS
3. You must comply with Australian non-concessional contribution caps

If you are under 55, a direct transfer of a defined benefit pension to an Australian super is not possible. However, alternative options such as an International Self-Invested Personal Pension (SIPP) may be utilised to manage your pension until you reach the minimum age threshold.

In contrast, you may transfer a defined contribution pension before the age of 55, provided all other regulatory requirements are fulfilled.

How Much Can You Transfer to an Australian Super?

UK pension transfers to Australian super funds are classified as non-concessional (after-tax) contributions. As of 1 July 2024, the annual non-concessional contribution cap is $120,000 per financial year.

However, individuals under 67 may leverage the bring-forward rule, allowing them to contribute up to three times the annual cap in a financial year, or $360,000, as long as the total super balance (accounting for the transferred amount) does not exceed $1.9 million.

If your transfer exceeds the non-concessional cap, you are required to:

• Withdraw the excess amount
• Pay a 47% tax charge on the excess amount

What Are the Tax Implications of Transferring a UK Pension to a Super?

Once your UK pension is successfully transferred into an Australian superannuation fund, it becomes subject to Australia’s superannuation tax rules. When you access these funds, withdrawals are taxed based on the following:

• Your age at withdrawal
• The type of withdrawal (lump sum or income stream)
• The composition of your super balance (tax-free vs. taxable components)

The tax-free portion of your super includes after-tax contributions, such as non-concessional amounts transferred from your UK pension, spouse contributions, and government co-contributions. Withdrawals of these components are tax-free regardless of age or withdrawal method.

If you’ve transferred your UK pension into a super that already includes a taxable portion, your withdrawals from said super will be subject to tax because Australian law requires withdrawals to maintain the same proportion of taxable and tax-free components as at the time of the first withdrawal. Selective withdrawal from a specific component is not permitted.

The taxable portion includes pre-tax contributions and investment earnings on those contributions, further divided into:

• Taxed element: Contributions taxed at 15% within the super fund
• Untaxed element: Contributions that have not been taxed, typically from unfunded public sector pensions or certain defined benefit schemes

Tax Rates on Withdrawals

The tax you pay on withdrawals depends on your age, whether you take a lump sum or an income stream, and the balance of non-taxable and taxable components:

Should You Transfer Your UK Pension to Australia?

Transferring your UK pension is a significant decision that impacts your financial security in the later stages of life. Expats are typically presented with three options:

1. Leaving your pension in the UK
2. Transferring your UK pension to an Australian super
3. Transferring your UK pension to an International SIPP

Each comes with distinct advantages and drawbacks, which must be carefully evaluated based on your financial objectives and retirement timeline.

Leaving Your Pension in the UK

Leaving your pension in the UK means it will continue to grow under the same conditions as if you were still residing in the country. The funds remain invested according to the scheme’s structure, and you retain the protections and governance of the UK’s Financial Conduct Authority (FCA).

However, when you eventually access your pension, you may face tax obligations in both the UK and Australia.

If the pension is paid into a UK bank account, 25% of the lump sum withdrawal is tax-free, while the remaining 75% is taxed at your UK marginal rate. Regular pension income is also taxed as earnings in the UK.

Should you transfer pension funds to an Australian bank account, exchange rate fluctuations and international transfer fees may diminish the value of your savings. Any amount withdrawn and used in Australia may also be subject to taxation in Australia.

Transferring Your UK Pension to an Australian Super

For those planning to retire in Australia, moving a UK pension into a super fund offers more control, more favourable tax treatment, and direct access to retirement savings in the local currency. Unlike UK pensions, Australian super funds provide a tax-advantaged structure where investment earnings are taxed at concessional rates (15%), and withdrawals after age 60 are generally tax-free.

Australian supers also offer a variety of investment options, ranging from conservative fixed-income funds to high-growth options. Choosing the right investment strategy within the fund is crucial and should align with your financial goals and risk tolerance.

Additionally, consolidating your UK pension into an Australian super simplifies retirement planning. Instead of managing pension funds across two jurisdictions, you centralise your investments under one regulatory framework. This reduces administrative complexity and eliminates currency exchange risk, as your retirement savings are already in AUD.

Once your pension is transferred to Australia, the process is irreversible. You will no longer benefit from UK pension protections, and any unique features—such as guaranteed annuity rates in defined benefit schemes—will be forfeited.

It is critical to consult a pension transfer specialist and a financial adviser to assess whether these trade-offs align with your long-term financial strategy.

Transferring Your UK Pension to an International SIPP

For UK expats not old enough to transfer their pension into an Australian super, an International SIPP serves as a tax-efficient alternative that allows continued pension growth under UK regulations while offering greater investment control than traditional UK pensions.

One of the main advantages of a SIPP is tax-deferred growth. Unlike withdrawing and reinvesting funds yourself (which would trigger immediate tax liabilities) or paying concessional tax on growth, an international SIPP allows investments to compound without annual tax deductions on earnings.

Additionally, unlike standard UK pensions (and some super funds), which limit investment choices, an international SIPP allows access to a broader range of assets, including stocks, bonds, ETFs, and managed funds—both UK and global—enabling you to tailor your portfolio to suit your risk appetite and financial objectives.

Additionally, international SIPPs allow pension withdrawals in multiple currencies, reducing exposure to unfavourable exchange rates when accessing funds from abroad.

However, an international SIPP remains subject to UK tax rules. Withdrawals will be taxed under UK income tax rates, so consulting with an expat tax consultant or an adviser is crucial to avoid double taxation on distributions.