Q In 2007 I migrated from the UK to Australia. I have a UK Pension that I wish to transfer to an Australian QROPS. The UK Pension fund has informed me that they will not release the funds until they have confirmation that the receiving Australian Superannuation Fund continues to qualify as a QROPS? What does this mean?
A To be eligible to move your Pension fund to Australia, you are required to move the funds to a Qualified Recognized Overseas Pension Scheme (QROPS). These are superannuation or pension funds recognized under UK law as being eligible to receive transfers from UK Pension Schemes.
Effective 6 April this year, the UK changed the requirements for a fund to meet the criteria for a QROPS. Under the new rules, QROPS must not allow for the release of funds to the member prior to the member turning 55.
The Australian Superannuation system does allow access to Superannuation prior to age 55 under certain conditions. These conditions of release may include financial hardship, temporary incapacity and compassionate grounds. Additionally, Australian Superannuation funds permit withdrawal of funds if you are under 55 and have breached applicable Superannuation contribution limits. UK Pension schemes do allow access to Pensions prior to age 55 but only under exceptional conditions of ill health that are more restrictive than the conditions applicable in Australia.
Australian registered QROPS Superannuation funds have been asked to confirm to Her Majesty’s Revenue and Customs (HMRC) in the UK that they will satisfy the new requirements to maintain QROPS status. It is unlikely that any Australian Superannuation funds will be able to meet these new requirement without amendments to their Superannuation Trust Deed.
If a transfer is made to a fund in Australia that does not qualify under the revised conditions of a QROPS, the transfer may be subject to tax of 55% in the UK.
It is most likely that your UK Pension fund has suspended all QROPS transfers to Australia until they receive confirmation from HMRC that the receiving Australian fund will continue to qualify as a QROPS. Contact your Australian Superannuation fund and request an update on their QROPS status. All Australian QROPS will have until 17 June to respond to HMRC with an update on their continuing compliance with the requirements to remain a QROPS.
The likely consequences will be that the Australian Superannuation funds may elect to cease qualifying as a QROPS. Alternatively they will need to amend their Superannuation Trust Deeds to corral UK Pension transfers within the Australian fund to a more restrictive requirement to comply with HMRC.
Confirm the current status of your Australian Superannuation fund and their intended response to the UK changes. Most likely some Australian funds will meet the revised QROPS requirements however this will take time and money.