- Home » Expat News » Oz lifetime contribution cap bad news for expat pensions
Oz lifetime contribution cap bad news for expat pensions
| Published: | 11 May at 6 PM |
Want to get involved?
Become a Featured Expat and take our interview.
Become a Local Expert and contribute articles.
Get in touch today!
Become a Local Expert and contribute articles.
Get in touch today!
Australia’s harsh new law regarding the total amount of lifetime contributions to a pension is set to hit expats hard.
Last week’s announcement by the Australian government set out a new, much lower, limit on the ‘after tax’ pension contributions for British expats with Australian pension accounts. The reduced lifetime amount now limits pensioners to A$500,000, the equivalent of £254,000 sterling, and is around 25 per cent of the £1 million allowable on British-based pensions taken in the UK.
Previously, UK pensioners living in Australia were allowed an annual cap of £91,500, or A$180,000. The new lifetime contributions cap, introduced immediately after its announcement as part of the 2016 Oz budget, may well result in many pension savers having to keep a large proportion of their capital in UK bank accounts or UK pension plans rather then incorporate it as intended in regular pension payments.
Basically, the changes will make advice given to expats wishing to transfer their pension to Australia far more complicated. Those with over the stated amount will need to get rid of the excess or face fines of up to 45 per cent on its total. The Australian government’ s overhaul of private pensions is aimed at embedding the system’s objective into a separate Act of Parliament, thus making it the base point for all pensions legislation to come.
Objectively, it seems the country’s private pension products are to be used only to supplement the Oz state pension. Confusion is rife over the need to ‘get rid of’ the excess of funds over and above the stated amount. It’s unlikely that contributory pension funds can simply be dumped or partially withdrawn, dependent on their country of origin. However, this pans out, it seems that expats with substantial contributory pension plans are likely to lose out on their life savings.
Last week’s announcement by the Australian government set out a new, much lower, limit on the ‘after tax’ pension contributions for British expats with Australian pension accounts. The reduced lifetime amount now limits pensioners to A$500,000, the equivalent of £254,000 sterling, and is around 25 per cent of the £1 million allowable on British-based pensions taken in the UK.
Previously, UK pensioners living in Australia were allowed an annual cap of £91,500, or A$180,000. The new lifetime contributions cap, introduced immediately after its announcement as part of the 2016 Oz budget, may well result in many pension savers having to keep a large proportion of their capital in UK bank accounts or UK pension plans rather then incorporate it as intended in regular pension payments.
Basically, the changes will make advice given to expats wishing to transfer their pension to Australia far more complicated. Those with over the stated amount will need to get rid of the excess or face fines of up to 45 per cent on its total. The Australian government’ s overhaul of private pensions is aimed at embedding the system’s objective into a separate Act of Parliament, thus making it the base point for all pensions legislation to come.
Objectively, it seems the country’s private pension products are to be used only to supplement the Oz state pension. Confusion is rife over the need to ‘get rid of’ the excess of funds over and above the stated amount. It’s unlikely that contributory pension funds can simply be dumped or partially withdrawn, dependent on their country of origin. However, this pans out, it seems that expats with substantial contributory pension plans are likely to lose out on their life savings.
Comments » No published comments just yet for this article...
Feel free to have your say on this item. Go on... be the first!
