HMRC direct freeze on pension transfers in progress to Australian QROPS

[Andrew Williams]

Due to recent HMRC changes Australian Super Funds could potentially lose their QROPS status and given this HMRC have directed UK Pension Providers to freeze any payments for pension transfers in progress until after at least the 17th June to ensure that no members are hit with unauthorised payment charges.

 

This is the date that existing QROPS Super Funds have to re-notify HMRC that they continue to meet the HMRC QROPS legislation.

 

We know that the NHS have received these HMRC directives and that they will not make any further payments until at least then when they can check to see if the receiving Australian scheme maintains QROPS status.

 

Below is a communication from one of the major QROPS Super Funds in Australia that we use regularly for Pension Transfers (referred to as Super Fund X), it also explains what the changes are that have lead to this:

 

What has changed?

Super Fund X is required to comply with recent UK law changes impacting Qualifying Recognised Overseas Pension Scheme (QROPS) requirements from 6 April 2015. Super Fund X has received a letter from HMRC (the UK’s tax office equivalent), requesting that we confirm compliance with these changes by 17 June 2015.

 

The changes include restricting members aged under 55 from accessing benefits transferred to a QROPS, unless the member satisfies HMRC’s definition of ill-health¹. This impacts all Australian QROPS as Australian law allows payments to members aged under 55 in limited circumstances, including financial hardship, compassionate grounds, permanent incapacity or in accordance with a release authority relating to excess contributions.

 

How are we responding?

 

Our immediate action is to confirm that Super Fund X remains a QROPS, by progressing the following options:

 

1) Liaising with the FSC and other organisations that offer QROPS, to approach the HMRC directly to seek an exemption from this condition for Australian QROPS.

 

2) Confirming if superannuation and tax law permits us to change our scheme rules, so that members will only be able to access their QROPS monies after reaching age 55, or on the grounds of ill-health.

 

We understand that a consistent approach is being considered by some of our competitors who also offer QROPS.

 

Are there any concerns for members who transfer to Super Fund X before we confirm that it continues to be a QROPS?

If a transfer is made from 6 April 2015 to any superfund which does not confirm that it is a QROPS by 17 June 2015, then the HMRC could impose 55% tax on the value of the transfer.

 

We are taking a facilitative approach with HMRC to inform them of our approach, and to seek comfort that HMRC will not impose this tax on any transfers to Super Fund X.

 

As a further precautionary measure, we recommend advisers withhold transfers from UK funds to Super Fund X, until we have confirmed that Super Fund X remains a QROPS.

 

 

¹ The UK regulation definition differs to the Australian law definition.

 

 

Vista Financial Services are in the process of contacting all of our clients in relation to this and will also be contacting the relevant UK Pension companies to ensure that they are also following HMRC directive to freeze payments, if you have any concerns about this you should speak to your Super Fund or Financial Adviser.

 

Kind regards

 

Andy

[Erin]

Hello Andrew.

 

I think I am grateful for your update , just not the content of it.

 

I have been stalking this Pension topic and it is now time to seek help. We are in Perth and need some good advice and consultancy on Pensions and associated other UK/Australian financials etc. Do you have an office in Perth?

 

I definately do not wish to DIY this and am looking for a sound and professional company in Perth. I am an Australian but lived in UK for over 20 years and my husband is a UK/NZ dual who has been in Uk and now we are in Perth. So a bit more complicated.

 

Hope you can help as it is all starting to look a bit worrying.

 

Erin

[Andrew Williams]

Hi Erin

 

We are actually based in Adelaide and do not have offices in Perth I am afraid.

 

We do deal with interstate clients although at present we do have a temporary freeze on new business ourselves due to high demand.

 

That said given the state of play with pension transfers at the moment (specifically as above) it would not be a good idea to start looking at this area until this has been resolved.

 

I will update this forum as and when developments occur.

 

 

Kind regards

 

 

Andy

[Erin]

Hello Andrew,

 

Thanks for the reply.

 

I take your advice about waiting to see what pans out however my husband has a Private pension that he needs to decide whether to continue or to take the funds and transfer them. This will be end of July . Would your advice be to extend it and wait?

 

Are you aware of any Perth companies that would be suitable for us to deal with? Maybe email me directly if that is more appropriate ?

 

Erin

[Andrew Williams]

Hi Erin

 

Apologies for the late response, what type of pension fund does your Husband have, is it a defined benefit fund or an accumulation fund?

 

KR

 

Andy

[Erin]

It is an accumulation fund .

[Andrew Williams]

Hi Erin

 

If it is an accumulation fund then although there will be a noted retirement age he should not need to retire as such at this age and should be able to leave the funds as they are in accumulation.

 

This is based on general personal pensions, if it is a company accumulation fund it may be different depending on the rules of that particular fund.

 

If he is able to leave it in accumulation until the QROPS situation in Australia has been resolved it may be worth considering looking to de-risk the investment portfolio to guard against any short term volatility.

 

Please PM with any further questions if you wish to take this offline and I will provide an email address.

 

Kind regards'

 

Andy