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Hi Mike
In the boat as you on this one so I've been making a few enquires and have come up with the following info from a Brisbane pension company.
"There are some important changes happening to the UK tax system that you need to be aware of. We are waiting to get a definitive answer as to regulations. As it stands the HMRC have published these proposed changes to be implemented from April 6 2006 (A Day).
Important Changes to UK super Transfers
On April 6 2006 (A Day) the UK Revenue body will change the way benefits withdrawn from the UK are taxed. Broadly, the new rules will see most UK pension funds transferred to Australia taxed at 40% plus other penalties, where the payment date is on or after 6 April 2006.
However, although April 6 is fast approaching, many of the final regulations which set out how it will work in practice are yet to be finalised.
New Rules
From 6 April 2006, UK pension scheme members may still be able to transfer their benefits to Australia or another country, provided the registered UK pension scheme allows it but there may be significant tax consequences in the UK. From that date, a transfer from a UK pension fund to a non-UK scheme that is not a Qualifying Recognised Overseas Pension Scheme is treated as an ‘unauthorised member payment’ and subject to UK tax at 40% on the amount transferred.
Most overseas schemes are not registered in the UK – including Australian superannuation funds. The consequences of transferring pension benefits to a non-registered scheme will depend on whether or not it is a ‘qualifying recognised overseas pension scheme’.
In order for an Australian super fund to become a qualifying recognised overseas pension scheme’ certain criteria need to be met. As it stands we are not aware of any Australian super funds which are ‘qualifying recognised overseas pension schemes’ at this stage. Therefore if you wish to transfer your UK pension funds to Australia then you must act immediately. The problem being that usually pension transfers can take many months to occur. However we expect that one or more of the major super providers in Australia e.g. ASGARD will become qualifying recognised overseas pension schemes.
If the transfer payment and any other unauthorised payments to the member in a 12 month period exceed 25% of the member’s fund, the member (or beneficiary of the member deceased) will be charged a further 15% unauthorised payment surcharge by the UK revenue body. On top of this a scheme sanction charge and deregistration charge can also apply in certain circumstances.
Leaving your Pension in the UK
If you maintain your pension benefits in the UK and do not transfer them to Australia, and eventually your pension is paid or is already being paid, you will be liable for income tax in Australia on those pension payments and not benefit from the tax concessions that apply to Australian retirement income streams such as allocated pensions. Most UK pension funds offer a lump-sum component and an income stream; however this is not a long term solution.
If you have a pension transfer in the process it is imperative to get the transfer completed prior to the 6 April deadline. As discussed above the post April 6 tax consequences can be quite large".
The way it looks to me is that all these new rules are yet to be finalised and when they are I think there will be lots of Ozzy pension companies that "meet" the criteria. I think its a way of stopping people getting there hands on there pension pot before they are entitled to do so. I'm not to worried at this time but would welcome your and others opinions.
Kind Regards
Mick
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