UK Pension Transfers – Major changes again

At the recent UK budget UK Pension Transfers to overseas destinations were again in the firing line.

HMRC last made major changes in April 2015 and essentially because of these changes only people age 55 years and older can now transfer their private pensions to an Australian Superannuation Scheme with HMRC (Qualifying) Recognised Overseas Pension status (QROPS).

From this time many UK expat Australian residents under age 55 have been exploring the option of transferring their UK Pensions to a QROPS scheme in a different country for example Malta or New Zealand however the announcement on budget night has essentially put stop to this being a viable option as HMRC announced a new 25% tax on transfers to overseas (QROPS) schemes with some exceptions.

In addition to the new transfer tax being introduced there are a number of changes around how and when the pension money that has been transferred can be accessed and if withdrawals and or payments are made or taken from pension monies that have been transferred there may be tax charges/penalties levied by HMRC depending on how and when they are taken.
 
Therefore the situation as things stand currently for UK Expats in Australia with regards to their UK Pensions is:

Under age 55

There are no public offer schemes available in Australia with QROPS that can accept UK Pension Transfers in.

Therefore if you do have a UK pension then leaving it in the UK until age 55 (currently) is typically your only option without being hit hard with UK taxes.

However it may still be wise to consider reviewing your UK pension with an appropriate UK FCA regulated Adviser for some of the following reasons:

• You have a defined benefit (aka final salary) scheme and wish to explore taking the lump sum offered and transferring it in a personal pension (currently transfer values are historically high for these type of schemes);

• You wish to ensure that your money is invested in an appropriate risk profile you should ensure it is working as hard for you as it can within your desired risk level (you may be too aggressively invested or to cautiously invested for your situation).

• You wish to be invested in a pension that allows you to invest in multiple currency options particularly Australian Dollars (currently sterling is weak against the Australian Dollar from a historical point of view however this may change going forward, if the change is in favour of sterling you may wish to have your monies converted to Australian Dollars at that point to then protect against future currency risk).

Over age 55

It is possible to transfer a UK Pension to an Australian QROPS for someone who is over age 55. This is possible by way of arranging a Self-Managed Super Fund (SMSF) and having it made QROPS compliant or by using a public offer Super Fund which is a QROPS (which option suits will be based on numerous individual factors).

A pension transfer to an Australian QROPS for someone that is resident in Australia is an exemption under the new 25% tax charge as follows:

• Transfers to QROPS requested on or after 9 March 2017 will be taxed at a rate of 25% unless at least one of the following apply: 
    o both the individual and the QROPS are in the same country after the transfer

However note that if a person who does transfer to an Australian QROPS ceases being an Australian resident within 5 full UK tax years of the transfer being received then the tax charge can be levied.

It may or may not be advisable to transfer a UK Pension to Australia as again it will depend on a number of individual factors) however financial advice is recommended to ensure A) it is advisable to move out of your current scheme and B) to navigate the complexities of a transfer (if of course a transfer is advisable)

By Andrew Williams 
Financial Adviser (FPA Member AFP ®)
Director - Vista Financial Services
Authorised Representative No. 322874
Professional Investment Services Pty Ltd
ABN 11 074 608 558
Australian Financial Services Licence No. 234951