QROPS in Australia – Transferring a UK pension
Written by E4E Editor on 23 May 2018
Since April 2015, transfers from UK Pension Funds to Australian Superannuation funds have become difficult to complete due to reforms in the UK pension law regime. Please note, this article was originally written in January 2017, but has been updated with recent updates and changes.
Two of the most common questions over the past couple of years include whether you:
- can complete a transfer if your under age 55; and
- still need to set up a Self-Managed Superannuation Fund (SMSF) to get around these changes.
This article, looks at the answer to the above two questions, provides insight into what you can do if you have a UK pension and are considering your options regarding a QROPS in Australia.
Limitations and restrictions of QROPS in Australia
The amendment of the UK pension law regime in 6 April 2015 effectively closed transfers from UK pension funds into Australian pension funds - unless the Australian superannuation fund did not allow a payment of a pension before the member reaches age 55 (or retirement) on the grounds of ill-health as defined under UK law.
However, in the vast majority of cases, superannuation funds within Australia do allow withdrawals in certain circumstances (such as severe financial hardship, total and permanent disablement and compassionate grounds). This meant that the most Australian superannuation funds (including SMSF’s) did not comply with the UK Pension laws from 6 April 2015.
In practical terms, the opportunity to undertake a transfer from a UK pension fund now onlyapplies to people over 55 who:
- have a SMSF; or
- become a member of a specialised complying public offer super fund which has become available.
The SMSF and public offer Superannuation fund need to be classified as a Qualifying Recognised Overseas Pension Scheme (QROPS) and be registered on the List of Recognised Overseas Pension Schemes (which is available on the Her Majesty’s Revenue and Customs (HMRC) website).
Can expats legitimately transfer a UK Pension scheme to a QROPS in Australia?
Some specific considerations you also need to consider includes the amount of the UK pension transfer which will count against your non-concessional cap. This depends on the following:
- A yearly cap of $100,000 per annum for members 65 or over but under 75. A bring forward rule applies to members under age 65 for the amount of $300,000 over a three-year period.
- A lifetime contribution limit of $1.6 million will also apply. If your total super balance is over $1.6 million you won’t be able to make any further non-concessional contributions to super from 1 July 2017. Any super monies you have in your retirement income account is included towards this threshold.
- Prescribed reporting and compliance requirements to the HMRC as part of the QROPS requirements . This obligation continues until 10 years has lapsed from the date of the transfer of UK sourced monies into the SMSF.
Requirements for an Australian SMSF
Commencing a SMSF is a big decision and should be considered as part of your overall goals and objectives. The amount of funds needed to commence a SMSF has been debated and the relevant regulators have set minimum benchmarks.
Ultimately, a SMSF can give you great flexibility and control in managing your superannuation pension fund, however, a simpler solution using the specialised retail superannuation fund might be preferable based on your needs.
Seeking independent advice from a qualified financial adviser who has extensive knowledge of the UK pension rules, QROPS requirements and also Australian pension is the best way forward as time is running out to take advantage of the higher non-concessional contributions cap until 30 June 2017.
Request a free pension consultation
At Experts for Expats, we work with independent advisers in Australia who are able to assist all British expats and former residents of the UK with UK pensions looking to transfer their pension funds to an Australian superannuation fund.
Through our exclusive partnership, we’re able to offer an initial free consultation to anybody considering transferring their UK pension to a QROPS in Australia. The consultation will focus on general information only with no personal advice being provided. QROPS in Australia is an extremely complex area and requires specialist local knowledge, over and above standard financial advice for expats, to ensure you avoid potential penalties and fines.
After your initial free consultation, if personal advice is required, the independent adviser will provide you with a cost estimate and a scope of work. Working with an independent adviser on a fee for service basis will ensure you are in control and avoid the pitfalls experienced within the expat market.
Simply enter your details using the form and we will arrange your free consultation within 48 hours of your initial request. At no time will you be under pressure to take any advice offered, which also makes the consultation a perfect opportunity to double check any advice or information you have previously received.
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If you're considering a QROPS in Australia, enter your details below to request a free consultation with an independent financial adviser