Detangling The Pension Maze

The pensions maze can be confusing if you don't know which way to go.

The pensions issue has been big news recently and it’s left a lot of people confused over where they stand. However if you are planning to emigrate to Australia and are worried about getting a pension over there, don’t let it put you off. With a little careful planning it needn’t be a complicated issue. Read our pension guide and let us lead you through the pension maze to find the right solution for you.

Pension History – A Brief Overview

The UK state pension was first introduced in the early 1900’s by the Liberal Chancellor of the Exchequer Lloyd George. The basic rate was between 1s and 5s which was available to people over the age of 70 who had an income less than 12s. In 1911 the same Liberal government introduced the National Insurance Act which required all wage earners to make a contribution against illness, unemployment and their pensions.

Pensions have come a long way since then and the current UK pension rates are £95.25 per week for single people and £152.30 for married couples. So what happens to your pension entitlement if you move abroad?

Social Security Agreements Between Australia and the UK

Previously the UK had a bilateral agreement with Australia on social security. That meant that if you moved to Australia your periods of UK residence would be treated as periods of residence in Australia. Therefore so long as you had paid your National Insurance contributions in the UK you would be eligible for the Australian Age Pension. The amount a UK pensioner received from their UK state pension would be detracted from the Australian Age pension.

The agreement however was termination in March 2001 largely because of the UKs refusal to index the UK state pensions for expats in Australia, even though they do so for expats in other countries. This meant that expats in Australia did not benefit from any state pension rises. Therefore if a British expat in Australia retired in 1999 they would still only receive £66.75 per week from their British state pensions. This fixed pension rule is also in place in Canada and South Africa.

The termination also meant that British expats would not have any early access to Australia’s Age Pension or other benefits unless the migrated on or before 1 March 2000. Their residency in the UK would not count as residency in Australia. Migrants who arrived in Australia before 1 March 2000 would received their payments as agreed before the social security termination.

This termination was challenged by a group of pensioners, most notably Annette Carson who challenged the Department for Work and Pensions for refusing to index her pension and make annual increases because she lived in South Africa where no bilateral agreement was in place. Her court case was taken up by the Alliance of British Pensioners in South Africa as well as Canada and Australia.

The Expats Pension Battle

There followed an eight year battle through the High Court, Court of Appeal, the House of Lords and finally the European Court of Human Rights who dismissed their claims that the British Government were breaching their human rights by failing to up-grade their pensions, bringing them into line with the cost of living. It was the end of the line for the pensioners who can now only rely on public support to try to get the government to change its mind.

So what does this mean for migrants who wish to emigrate to Australia today?

Getting The Right Australian Visa

Well the advice is to choose your Australian visa wisely as some visas will not entitle you to the Australian pension, such as any temporary or return pending visa. You must have a permanent Australian visa in order to claim benefits in Australia. It is vital that your UK affairs are in order as pension claims are decided on a case by case basis, if you have sold your home in the UK and have invested the assets, this could go against you as benefits in Australia are means tested. If possible, get some independent financial advice or go to a professional pension transfer company.

Australian Age Pension and Special Benefits

Largely speaking, if you have been resident in Australia for ten years when you retire then you are eligible for the Australian Age pension as well as your state pension which will be calculated at the time you left the UK. So if you left the UK in 2005 for Australia, than that is the date at which your pension will be fixed.

The Australian pension age is 65 for men with women able to retire younger. In 2014 this will change to 65 for both men and women. The payment rates are $644.20 per fortnight for a single person and $485.60 each per fortnight for a couple.

If you have been living in Australia for less than ten years but more than two, then you may still be eligible for Special Benefits but these are means tested and again are decided on a case by case basis. If you are facing severe hardship and have not been in Australia for two years your case may still be considered. You would need to contact the Australian CentreLink Scheme for more information.

Private Pension Transfers

If you have a private UK pension you need to decide whether it’s worth transferring that pension to Australia or leaving it in the UK to mature. Again this is where sensible financial advice comes into its own. Generally speaking it may be wise to leave your pension where it is until you are certain that you are staying put in Australia – transferring pensions can be a costly business and if you move to Australia only to decide to return to the UK a few years later it could be an expensive mistake to move your pension around with you. If you do want to transfer a UK pension scheme to Australia then you can do this through the Qualifying Recognised Overseas Pension Scheme (QROPS).

If you are to spend any time working for an Australian company then chances are that a certain amount of your income (usually 9%) will be paid into a superannuation fund which is accessible once you retire. This will not affect your UK state pension.

Enjoying Your Retirement

Don’t let any of the above put you off enjoying your retirement in Australia. With the right financial advice and careful planning there is no need for you to endure hardship in a country where the sun always shines. There are countless benefits to living in Australia and it is still the choice of country for most Brits emigrating abroad. The easy pace of living is particularly desirable to those of pensionable age. So start your planning now and look forward to spending your retirement years in relaxed, sunny surroundings!

Below are a list of pension transfer companies that are able to give you financial advice and support.

Montfort International Plc

Pension Transfers

Pension Bureau

Pension Advisory Service

Love Australia? Let us keep you informed...

• Join the Embrace Australia community today. Have your questions answered by our experts, start your own blog, get vital migration information and gain valuable insight from those who have already made the journey.
• Subscribe to our RSS Feed and have all our daily news and features delivered straight to your news reader.
• Join our mailing list -