Government Response to UK Pension Ban to Australia (QROPS)

[Andrew from Vista Financial]

As you may or may not be aware there are changes afoot to the UK pension system and in particular the Government had announced the possibility of a Ban on Pension transfers.

 

See Thread: Proposals to Ban Pension Transfers

 

Following the announcement they conducted a consultation and as a result of this it was stipulated that there would be a Ban on Pension transfers from Un-funded Government Defined Benefit Pensions for example NHS, Police and Armed Forces:

 

See Thread: Outcome of Government consultation regarding Pension Transfer Ban

 

My opinion on this has always been that a transfer of a Pension to Australia should not be done on the basis of a possible ban as it does not affect ones actual pension benefits and these changes do not put them at risk.

 

A transfer should be done under the right circumstances after fully investigating the implications of leaving against transferring based on your individual situation.

 

I also have continued to highlight that there will still be situations where transfers are able to continue based on the ‘very limited circumstances’ definition and that this could very well mean a person who is living overseas ie in Australia may fall into this definition.

 

However there does not seem to be exact details of what this ‘limited circumstance’ definition entails in any of the publications released by Government.

 

I think that the way Government have dealt with this is atrocious as lots of people are feeling the pressure of these changes without being allowed much breathing space.

 

Therefore I contacted HM Treasury to firstly express my concerns that there are a lot of expats rushing into transferring pensions purely based on a potential ban mainly fuelled by Pension Transfer Companies/Banks/Advisers coercing people to do so and to try to get an explanation of what these limited circumstances are.

 

Their response as follows:

 

“Dear Andrew

 

Thank you for your email dated 26 August in relation to the Freedom and Choice in Pensions consultation, and in particular, for your query in relation to transfers to overseas pension schemes and the limited circumstances under which the transfer ban for unfunded public service schemes may not apply, and for highlighting your concerns in this area. The DWP has passed on your email to the Treasury.

 

Government will set out in legislation in due course the limited circumstances under which transfers out of unfunded public service pension schemes to defined contribution schemes will be allowed.

 

The government recognises that the changes to the pensions tax rules will have implications for the rules relating to Qualifying Recognised Overseas Pension Schemes (QROPS). The Government will consider these implications further to ensure that the rules relating to QROPS are appropriate when the new system comes into force.

 

I hope this is helpful and thank you for taking the trouble to make us aware of your concerns”.

 

Yours

HM Treasury

 

Again we are still no clearer on this however as you will see there is going to be further consideration in relation to QROPS which are essentially Pension Transfers Overseas (ie to Australia).

 

Let’s hope that we can get this information from Government sooner rather than later so that anyone contemplating a transfer is able to do so purely on the merits of where their retirement monies might be best placed as opposed to feeling pressured into doing so .

 

Obviously although my opinion is that they may still be allowed it is still unknown and so if you are considering a transfer and a ban does come into effect the effective date is April 2015.

 

As always I will keep members abreast of any further changes/announcements.

 

Regards

 

Andy

Edited September 25, 2014 by Andrew from Vista Financial

[Lindor]

Thank you Andy

[Ken]

For most people who have done it the transfer of a pension from a defined benefit to a defined contribution has lost them a lot of money. Financial advisers should have been telling them not to do it - but there are no commissions available for that advice so the less ethical will have been tempted to give the wrong advice. It's therefore good news that the government is clamping down on the practice (even if it is only because they're concerned the courts might stick them with the liability when the compensation claims start rolling in).

[Gbye grey sky]

For most people who have done it the transfer of a pension from a defined benefit to a defined contribution has lost them a lot of money. Financial advisers should have been telling them not to do it - but there are no commissions available for that advice so the less ethical will have been tempted to give the wrong advice. It's therefore good news that the government is clamping down on the practice (even if it is only because they're concerned the courts might stick them with the liability when the compensation claims start rolling in).

 

I doubt this is the primary motivation for the Government. The relaxation of the pension rules may tempt many to switch their defined contribution 'pot' and if they do there will be a substantial initial drain on the Exchequer. But Andy is correct in that announcing the possibility of a ban in April 2015 might force the hand of some and cause them to make a very poor decision for their own circumstances.

[le petit roi]

UK should ban all pension transfers....isn't that the Aussie way?

 

The Oz Govt want all financial dealings to be one way.

Edited September 28, 2014 by le petit roi

[Danny842003]

What does this actually mean to a 30 years old who has paid NI contributions since I was 18 and has about 9 years of a military pension. I haven't got my visa yet but all things being well should be granted it around March.

 

Im not sure I really understand what's going on at all.

[Johndoe]

What does this actually mean to a 30 years old who has paid NI contributions since I was 18 and has about 9 years of a military pension. I haven't got my visa yet but all things being well should be granted it around March.

 

Im not sure I really understand what's going on at all.

 

Unless I'm mistaken and it's changed since I last looked, it should mean nothing to you, based on the fact that my wife's military pension of 9 yrs can't be touched till she's 65.

[Gbye grey sky]

What does this actually mean to a 30 years old who has paid NI contributions since I was 18 and has about 9 years of a military pension. I haven't got my visa yet but all things being well should be granted it around March.

 

Im not sure I really understand what's going on at all.

 

It has no impact on your State Pension but it may impact your options on your military pension. Andy provides links to a couple of other threads that will provide further information.

[Paul from staffs]

Andrew, am I correct in thinking that these new proposals only apply to people who have not yet taken there pensions?

I am aged 50 and being medically retired from my role as a Police officer in the UK within the next month due to an injury on duty. I will get a lump sum and a yearly pension paid monthly

My Son lives in OZ where he works as a Police officer having been recruited by WA and our plan is to move over there once our visa has been finalised (contributory parent) which hopefully could be Dec 2015.

The cost of this visa is considerable and we could only make this move with my pension being paid there (OZ) each month supplemented by working over there

Will these new proposals have any effect on me being able to have my pension paid each month from the UK over to OZ?

regards Paul

[NicF]

Andrew, am I correct in thinking that these new proposals only apply to people who have not yet taken there pensions?

I am aged 50 and being medically retired from my role as a Police officer in the UK within the next month due to an injury on duty. I will get a lump sum and a yearly pension paid monthly

My Son lives in OZ where he works as a Police officer having been recruited by WA and our plan is to move over there once our visa has been finalised (contributory parent) which hopefully could be Dec 2015.

The cost of this visa is considerable and we could only make this move with my pension being paid there (OZ) each month supplemented by working over there

Will these new proposals have any effect on me being able to have my pension paid each month from the UK over to OZ?

regards Paul

 

The new rules have nothing to do with being paid your pension - you will continue to be paid your pension where ever you decide to live. The rules are about before you retire and start drawing your pension and relate to transferring the value you have in your pension pot to another pension fund.

[Andrew from Vista Financial]

Hi Paul

 

NicF has covered this for you I hope?

 

Andy

[Paul1Perth]

Andrew, am I correct in thinking that these new proposals only apply to people who have not yet taken there pensions?

I am aged 50 and being medically retired from my role as a Police officer in the UK within the next month due to an injury on duty. I will get a lump sum and a yearly pension paid monthly

My Son lives in OZ where he works as a Police officer having been recruited by WA and our plan is to move over there once our visa has been finalised (contributory parent) which hopefully could be Dec 2015.

The cost of this visa is considerable and we could only make this move with my pension being paid there (OZ) each month supplemented by working over there

Will these new proposals have any effect on me being able to have my pension paid each month from the UK over to OZ?

regards Paul

 

Hi Paul. I don't think the changes will have any affect on what you have in place at the moment. I have lived here since 92 and got a lump sum and a monthly paid pension from my NCB pension scheme when I was 55. I got offered it at 50 but waiting for another few years just made the figures better. I had to arrange to get the money transferred through Citibank, who presumably take a fee, but it works well.

 

Depending on your situation you might have to declare it as unearned income and pay tax on it at this end though.

[Paul from staffs]

Yes, all covered thanks Andy, and thanks NicF

 

Paul

[Paul from staffs]

Thanks Paul1Perth

 

Paul

[Nearlythere1]

Hi Andy,

Any further news on the "Very limited circumstances" element of your original post? I have an MoD pension, am moving to Aus permanently in 9 days.. Needless to say , I am still none the wiser..

Could you advise on the likely costs £ or % to my pension if I decided to move it to an Aussie QROPS super fund, in relation to transfer fees and Govt taxes etc? Just trying to way up the pros and cons while I still have a choice.. :wink:

 

Many thanks

[Gbye grey sky]

Hi Andy,

Any further news on the "Very limited circumstances" element of your original post? I have an MoD pension, am moving to Aus permanently in 9 days.. Needless to say , I am still none the wiser..

Could you advise on the likely costs £ or % to my pension if I decided to move it to an Aussie QROPS super fund, in relation to transfer fees and Govt taxes etc? Just trying to way up the pros and cons while I still have a choice.. :wink:

 

Many thanks

 

I know that you were not asking me but I am in the same boat. I believe that we are going to have to wait for the Chancellors autumn statement on 3 December. If emigration is not one of the 'limited circumstances' exemptions then we do need to make a prompt decision after 3 December and before the April deadline. You don't have to enact anything while you are still in the UK.

[Nearlythere1]

I know that you were not asking me but I am in the same boat. I believe that we are going to have to wait for the Chancellors autumn statement on 3 December. If emigration is not one of the 'limited circumstances' exemptions then we do need to make a prompt decision after 3 December and before the April deadline. You don't have to enact anything while you are still in the UK.

 

Thanks Gbye grey sky, it would be nice to have a little bit of time left to decide, before the restrictions come into affect (what ever they will be).. 3rd Dec logged in the diary.. Cheers.. :confused:

 

PS, do you know what the fees are like for the transfers?

Edited October 25, 2014 by Nearlythere1
Added PS

[Gbye grey sky]

Thanks Gbye grey sky, it would be nice to have a little bit of time left to decide, before the restrictions come into affect (what ever they will be).. 3rd Dec logged in the diary.. Cheers.. :confused:

 

PS, do you know what the fees are like for the transfers?

 

No. I suspect that it varies between providers and by the value of the fund to be transferred but dont know this. But whatever they are will be factored into the overall equation to inform whatever decision I make on this. While important I suspect that such fees and charges are unlikely to be a determining factor in my decision.

[le petit roi]

Unless there have been changes and if I remember correctly, in the UK the value of a fund isn't necessarily the transfer value realised. Many years ago while I was residing in the UK I looked at transferring one pension pot into another and the transfer value was derisory....it bore no relation to the amount I had paid in never mind any capital growth which had been achieved over the years. At that point, I considered the UK pension system a rort and would never pay into one again. The Oz Super system, although not perfect, does seem fairer.

[jayrigg]

Hi Everyone,

 

I have just had my 13 year armed forces pension calculated and been given a document by a company called Pension Transfers Direct which tells me the advantages of transfering it to oz or keeping it in the UK.They have quoted me a Total fee of $4,359 OZ dollars for all the transfers and admin with it.Hope this helps.

 

Cheers,

 

Jay

[Andrew from Vista Financial]

Hi Andy,

Any further news on the "Very limited circumstances" element of your original post? I have an MoD pension, am moving to Aus permanently in 9 days.. Needless to say , I am still none the wiser..

Could you advise on the likely costs £ or % to my pension if I decided to move it to an Aussie QROPS super fund, in relation to transfer fees and Govt taxes etc? Just trying to way up the pros and cons while I still have a choice.. :wink:

 

Many thanks

 

 

Hello

 

Sorry no further info to give outside of what was posted in the initial post, 3rd December seems to be the date we are awaiting, I will certainly update as soon as I hear anything.

 

In terms of likely costs, this would vary massively depending upon who you used and the service you wanted/were provided with.

 

Many Banks/Companies will provide “Free Advice”……………..which is essentially just a generic report explaining QROPS from a UK perspective and how a transfer to Australia should occur.

 

The report is essentially justifying a transfer to Australia and the Bank/Company are generally only paid if a transfer occurs so any work done upfront is not remunerated if a transfer does not proceed hence the bias toward transferring.

 

This is fine if people have already made their minds up to transfer for one reason or another, fees for this transfer service with these companies does vary although there does seem to be a trend of charging around 3.3% of the balance (which can work out to be extremely excessive!!).

 

Note that the general advice provided in these reports is not personal advice and does not include full analysis of one’s personal situation goals and objectives or carry out full investigation and retirement modelling taking account of spouse, other current and future assets and income streams or retirement plans such as income required in retirement, age at which retirement is intended etc, evidence of this is that to receive a free report a person is usually only required to give very limited information ie name, date of birth, address and pension details etc and sometimes without even speaking to anyone as can be done over the internet.

 

If you do wish to understand the full implications of whether a transfer is right for you or not all of the above should be factored in and modelling carried out so as to be able to provide a truer picture of the real financial position that a person might be put in at and during their retirement.

 

I generally recommend that anyone with a Final Salary (Defined Benefit) Pension follow this path so that they can truly make an informed decision based on their circumstances.

 

Expect to pay for this though a professional will need to invest many hours researching and financially modelling for their client.

 

Our fees here at Vista Financial Services

As a guide our advice which comes in the form of a Statement of Advice (SOA) (which is a legal requirement for any Financial Planner to construct when providing advice) ranges between $1,500 - $2,500 depending upon the merits of the case ie single/couple, number pf pension funds, type of pension funds and balances of pension funds, ultimately based on the the complexity of the case.

 

The advice with regards to UK Pensions is based on your personal situation, goals and objectives and will generally include comprehensive modelling based on leaving pensions in the UK versus transferring to Australia.

 

As part of this we run Retirement Projections for these scenarios factoring in also the UK State Pension and the Australian Age Pension.

 

We are then able to provide our professional opinion as to where we believe the benefits are best placed and fully detail how to navigate the transfer process and the implications of transferring if a pension/s is to be transferred.

 

If a transfer is going ahead we also recommend a suitable Australian Superannuation Fund (QROPS) and recommend an individually tailored investment approach/portfolio.

 

If a transfer is going ahead and a client wishes for us to implement the transfer we charge a further fee to administer and project manage the transfer/s and this fee is again dependent upon the work involved i.e single/couple, number of pensions etc which is fully disclosed in the SOA (this may range between around $1,000 - $3,000).

 

A services agreement is drafted prior to any work being undertaken.

 

The SOA fee is payable regardless of whether a transfer proceeds or not however if a transfer is going ahead and Vista is instructed to implement fees can generally be deducted from the transferred monies.

 

I hope this answers your question.

 

Kind regards

 

Andy

[Gbye grey sky]

Well, the Chancellor finished his statement many hours ago and I cannot find any mention at all yet of measures affecting those considering transferring their UK Government pension to a QROP. Presumably detailed measures are made available sometime later or perhaps it is difficult to unearth information beyond the headline grabbing announcements.

[Nearlythere1]

Hi Gbye grey sky, still no news on that front then? Have decided to go with Australian Super, as far as my contributions in Australia are concerned, seems to be the best performer of the Supers that I'm eligible to join in my line of work, and on QROPS list. Still waiting to find out about the UK civil service pensions transfer though.. Getting suspicious now lol..

[Gbye grey sky]

Hi Gbye grey sky, still no news on that front then? Have decided to go with Australian Super, as far as my contributions in Australia are concerned, seems to be the best performer of the Supers that I'm eligible to join in my line of work, and on QROPS list. Still waiting to find out about the UK civil service pensions transfer though.. Getting suspicious now lol..

 

Hi NT1. It seems that the Chancellor 'forgot' to mention anything about possible exemptions so for now will have to proceed on the basis that the ban will come into effect in April and make a decision based on that.

 

I hope all is well with you over there. Hadn't seen any updates but could easily miss them. You will need to change your name perhaps lol.

 

My OH is with Australian Super and she has always been happy with the returns (albeit she has a very modest amount in it-solely employer contributions in the 1990s.

[Andrew from Vista Financial]

Yes it is a real pity that the Government have not addressed this area as of yet.

 

Having again read through the reply email I received from Treasury the section that states this will be addressed (below) there is actually not a date that they have given as to when it will be addressed and the assumptions seemed to be that it would covered in the Chancellors Autumn statement:

 

"The government recognises that the changes to the pensions tax rules will have implications for the rules relating to Qualifying Recognised Overseas Pension Schemes (QROPS). The Government will consider these implications further to ensure that the rules relating to QROPS are appropriate when the new system comes into force".

 

So unfortunately it seems that people will have to make a decision based on what is currently known albeit there may be a chance they will still be allowed to continue however this really does put some people up against it now with just under 4 months to go.

 

I have written a reply email to Treasury to ask if they can give some further clarification on this and when details might be provided.

 

Regards

 

Andy