UK pension transfers
Historically, the majority of overseas superannuation transfers came from UK pension schemes.
However, on 6 April 2015 new rules came into effect in the UK which introduced a number of restrictions on UK pension transfers including:
- unfunded public service defined benefit super scheme are no longer able to be transferred
- defined benefit members (other than members of unfunded public service defined benefit schemes mentioned above) must receive advice from an 'authorized independent adviser' before transferring or cashing out their defined benefit. An exception applies where the transfer value of the member's benefits is less than £30,000.
- Qualifying Recognised Overseas Pension Schemes (QROPS) must comply with the UK pension age test. This test requires the payment of benefits to members under the age of 55 to be prohibited other than in the case of incapacity. Unfortunately, this disqualified most large funds in Australia from being able to qualify as a QROPS fund as there are a range of conditions of release under the SIS Act, such as financial hardship and the release of benefits on compassionate grounds, which do not comply with the pension age test. However, it appears some SMSFs have subsequently been able to qualify as QROPS by restricting fund membership to people over age 55 only. Trustees wishing to explore this possibility should seek specialist legal advice.
Further changes were made to the UK pension laws in 2017, including:
- the introduction of a 25% 'overseas transfer charge' for certain transfers to QROPs, requested on or after 9 March 2017, unless one of a number of conditions apply. If both the individual and the QROPs are both resident in Australia, and remain so for five UK tax years, they are not affected by the new tax.
- funds that were QROPS on 8 March 2017 had to decide if they wanted their fund to continue to be a QROPS and operate the overseas transfer charge. Fund trustees were required to submit a revised undertaking to HM Revenue and Customs (HMRC) by 13 April 2017 if they wanted the fund to continue to be a QROPS. If the trustee did not do this, the fund stopped being a QROPS from 14 April 2017
- UK taxing rights were extended from five to ten tax years from date of last UK residency. This applies to payments out of a QROPs that receives a UK pension transfer on or after 6 April 2017.
Last modified: Friday, January 12, 2018