Sean Cranny works in London but plans to move to Australia next year with his girlfriend, an Australian national.
Sean Cranny works in London but plans to move to Australia next year with his girlfriend, an Australian national. He hopes to move to Brisbane, and to look for work in marketing, PR or market research, ideally in the public sector or higher education.
Making the move, though, means that Mr Cranny wants to tidy his finances, in particular his pension arrangements. He is unsure whether he can - or, indeed, should - transfer funds to Australia, and needs to find out more about how pensions and investments work there.
He has already set aside some savings to fund the move to Australia, but how should he best manage his money in the meantime?
We put his case to Meere Patel at Hargreaves Lansdown, Patrick Connolly at John Scott and Partners and Anna Sofat at Destini Global Financial Services.
SEAN CRANNY, 33, HEALTH SECTOR PROJECTS OFFICER
Education: BA (Hons) in Business Studies
Debt: £1,000 (credit card)
Pension: Paying £40 a month into a policy with Windsor Life, held since 1993. Local government scheme, with a transfer value of £2,584. Five months' contributions to Australian pension scheme.
Monthly outgoings: rent £400, bills, including food, £200.
Mr Cranny's largest assets are in his pension funds. The Australian pension system differs from the UK's, mainly because membership of a Superannuation Scheme, known generally as Super, is compulsory.
Ms Sofat points out that employers in Australia must pay nine per cent of salaries into a Super scheme, so Mr Cranny will be guaranteed pension contributions once he finds work. But the tax treatment of Australian pensions is very different. Australians pay tax on contributions at 15 per cent - here contributions are tax-free - and also on growth, again at 15 per cent. But unlike in the UK, benefits from an Australian pension are usually tax-free.
Mr Cranny will almost certainly be able to transfer his existing Australian pension to a new scheme. But the choice is less clear-cut for his UK pension funds. Under UK pension rules, he can continue to pay into his UK pension fund until 2006, based on his best earnings in the UK over the last five years, says Mr Connolly. Then, under pension simplification, his contributions will be limited to £3,600 before tax relief.
This means there is no immediate urgency for Mr Cranny to transfer his UK pensions; he might wish to wait until his residency becomes permanent. But Ms Patel recommends that Mr Cranny transfer his pensions to Australia once he is settled and working there.
If he does opt to leave his pension money in the UK, he may have to pay Australian tax on the growth in his pension, between the time he moves and transfers the money. Ms Sofat points out that he does have a window of six months to transfer pensions to Australia without incurring taxes. He will need to find a pension provider in Australia that will accept the transfer, and also check with the Inland Revenue here.
SAVINGS AND INVESTMENT
Ms Sofat cautions that the Australian authorities will also levy tax on any other investments Mr Cranny leaves in the UK. Growth, even if it is not realised, is assessed as income on an annual basis. Tax can be as high as 48.5 per cent, for incomes over AS$70,000 (£28,500) a year.
Ms Patel says the Australian investment market is well developed, with mutual funds that operate in a similar way to unit or investment trusts here. There are differences in the tax treatments of investments, but this should not put off Mr Cranny from setting aside money for the longer term.
In the short term, though, Mr Cranny is likely to need financial flexibility. Mr Connolly feels that he should keep his money accessible on deposit. As he plans to make the move to Australia a permanent one, he should look to hold his savings in Australian dollars, to minimise currency risk.
Mr Connolly adds, though, that Mr Cranny is likely to be paying more interest on his credit card than he makes on his savings. He should clear debts before leaving the UK, preferably immediately, in order to free up cash.
MAKING THE MOVE
Mr Cranny should look into opening an Australian bank account either before he moves - via a bank that operates both in the UK and there, or through the UK office of an Australian bank - or he should open one up as soon as he arrives.
Ms Patel says that Mr Cranny should keep an eye on the pound-Australian dollar exchange rate, as this fluctuates. The rate is now around AS$2.46 to the pound, but it has been as high as $2.80 and as low as $2.20 recently. Ms Sofat says that a reputable currency broker might be able to help Mr Cranny judge when to move his funds to Australia.