Confusion over transfers in Sterling – The right advice

In recent months we have seen the introduction of a new transfer option for UK pension funds that allows pension funds to be moved in pounds sterling and to be held in pounds sterling in an Australian superannuation fund.
On the surface that seems like a very good option and may prevent there being any Section 305.70 tax liability issues ever arising over the transferred funds.
It may also seem like a good option if you are of the opinion that the currency will move considerably in the short term and you can convert to Aussie dollars at any time once the funds are sitting in the sterling account.
However, unless you see this option as a very short term play then you have to question the merits of such a move, particularly when the sterling account pays no interest, but will still charge fees to the account.
When asked just this week by a client about this as an option I was able to point out that if they left the funds in the UK they would pay some tax on the fund earnings, but only at the rate of 15% and the funds would still be growing at CPI, whereas if they moved them into a sterling account they would receive no earnings at all but still have to pay the fund charges.
In this case my advice was to hold the transfer for the time being. The advice is right for the client and that has to be the most important consideration overall.

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