QROPS in Australia – Options for transferring UK pension funds to an Australian superannuation scheme
Written by E4E Editor on 4 January 2017
Follow Experts for Expats >
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.
One of the most common questions over the past couple of years has been whether you still need to set up a Self-Managed Superannuation Fund (SMSF) to get around these changes.
This article, which has been updated for 2017, looks at the answer to this question, provides insight into what you can do if you have a UK pension and are considering your options regarding a QROPS in Australia and also looks at forthcoming changes to the Australian pension system due to be implemented in July 2017.
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 only applies 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 timing as follows:
- Current rules / pre 30 June 2017:
The Government has confirmed non-concessional contributions will continue to be subject to a yearly cap of $180,000 for members 65 or over, but under 75. A bring forward rule applies to members under age 65 for the amount of $540,000 over a three-year period.
- New rules / post 1 July 2017:
The 1 July 2017 Super changes mean:
- 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
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.
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 a free consultation to anybody considering transferring their UK pension to a QROPS in Australia.
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.
Request free pension consultation (click to show form)
If you're considering a QROPS in Australia, enter your details below to request a free consultation with an independent financial adviser