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Important Legislation Changes to UK Pension Transfers
If you have recently transferred a UK fund to Australia or are in the process of transferring, there are some important changes to legislation that may affect you.
Superannuation funds are now required to amend their underlying rules in order to retain their QROPS status. In the UK, members who are under the age of 55 are not permitted to access pension benefits, unless the member satisfies HMRC’s definition of ill-health. All Australian superannuation funds with QROPS status are affected since superannuation rules permit withdrawals for members aged under 55 in limited circumstances such as financial hardship, compassionate grounds, permanent incapacity or in accordance with a release relating to excess contributions.
HMRC, the UK’s tax office equivalent, recently sent out a letter requesting that all qualifying superannuation schemes confirm compliance with these changes by no later than 17 June 2015. All Australian superannuation schemes were required to comply with recent UK law changes impacting QROPS starting 6 April 2015.
How are Australian Superannuation Schemes Responding?
Australian superannuation schemes must retain their QROPS status due to the level of UK funds they currently hold. The funds we have consulted with have confirmed that they are liaising with the Financial Services Council (FSC) and other Australian QROPS funds to approach HMRC directly to seek an exemption from this condition. In addition, they are seeking confirmation that they have the power to enact a change to superannuation rules and if so, the process required.
A number of superannuation providers have confirmed that they are taking a consistent approach with HMRC a resolution will be required to ensure their members are not penalised.
How does this affect me?
HMRC could impose 55% tax on the value of the transfer if a UK transfer is made after 6 April 2015 to any superfund which does not comply with the QROPS rules. The superannuation funds we have spoken with have requested that HMRC do not impose this tax on any transfers until a resolution has been met.
As a further precautionary measure, all UK schemes currently in the process of transferring funds have been contacted in order to temporarily suspend transfers until it has been confirmed that the Australian superfunds meet QROPS requirements.
In addition, the HMRC has informed UK Schemes that no payments should be made to Australian funds until further notice. All payments will be made as soon as the HMRC gives the permission to restart the process (hopefully by the end of June).
Pensions Transferred after 6 April 2015
If you have transferred a fund prior to 6 April 2015 but still have other pensions remaining in the UK, it is best to request the UK schemes to place a hold on the outstanding transfer, until further clarification has been received from the Australian Superannuation Schemes and HMRC.
Whilst this news may be alarming, please be assured that the Australian Superannuation Schemes as a whole are working with HMRC and the UK Pension Schemes to ensure compliance with the legislation. It is expected that there will be more news by 17 June 2015 and no action is required until confirmation is received from the super funds.
At the date this article was produced, no further updates were available from either the UK of Australian superannuation funds.
PTS Pension transfer Specialists
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