UK Pension Transfers Post 6 April 15 - Questions

[alavington]

Thanks, Andy!

[Brianqpr]

I have a defined benefit UK pension fund that at last valuation was worth close to £140k and has risen substantially over recent years. The changes to the ROPS rules are concerning as I had planned to transfer the fund to Australia when the time is right (i.e. once there is a better exchange rate!). If I have to wait until 55 (8 years away for me), and the fund keeps growing the way it has, I may have issues with contribution caps, especially if this ridiculous proposal for a $500k lifetime NCC cap gets up..

 

The exclusion of most schemes is ridiculous and seems to be purely based on the financial hardship and compassionate grounds release of fund options possible in Australia. These options are very limited in terms of how much it is possible to withdraw, and it is very difficult to meet the criteria to withdraw funds in this way. I assume the UK has removed most funds from the ROPS list due to (unfounded) concerns that people might be able to use these conditions of release to access transferred funds early. Has any effort been made to explain to the UK side just how limited these options are?

 

One solution I can think if is that funds could isolate contributions received as a result of a UK transfer and exclude this from any early access through financial hardship or compassionate grounds conditions of release. This may contradict SIS though. Perhaps we could look at amending the SIS rules to exclude UK transfers from these conditions of release if we can't get the UK side to change its position?

 

I would like to know what efforts are being made to address this situation with the UK side?

[Andrew from Vista Financial]

Hello Brian

 

There are really two points to this.

 

Firstly the loss/lack of ROPS for people under age 55.....the conditions of release (COR) that you mention do seem to be the ones that are regarded as being the drivers behind why Australian public offer funds can no longer conform to HMRC rules however there are actually others that create a bigger problem. A Trust Deed amendment could actually prevent withdrawal through the hardship and compassionate grounds COR I believe, the problematic ones are predominantly the ability to elect to release excess contributions that have created a breach of the concessional and non-concessional contributions.

 

Your thought around isolating ROPS monies has already been trialed and unfortunately failed as HMRC were unwilling to accept this as a solution, you see HMRC treat any money out of a ROPS as first out. It would seem at this stage the only way that HMRC will accept an under 55 solution is a law change in Australia however I am not sure that will be likely.

 

However there may be an upside for you as I do not see that you will have a problem regards the $500,000 lifetime cap (if passed) although I do not know your contributions background and so am making the assumption that no non-concessional contributions have been made previously.

 

The reason is as follows:

 

Your DB scheme is very unlikely to continue to increase in value this way and in fact perhaps more likely to be lower going forward. The mechanics involved when Actuaries calculate CETVs mean that one of the big factors to high values are the currently low government gilt yields. There really is not much room for them to get lower but perhaps there is more potential for them to get higher which is then likely to result in a lower CETV.

 

Secondly it is the base value that is important when looking at the cap in this instance so if it is currently under $500,000 there should not be an issue (again as above assuming no historic contributions).

 

Given that CETVs are currently very high and your intent is to look to move the monies to Australia there may actually be merit in you exploring the option of moving out of the DB scheme now and into a SIPP or QROPS (ex-Australia) until such time as it is possible to move to Australia, a definite solution we know exists at age 55 (perhaps could be before that in certain cases).

 

I hope this helps.

 

Kind regards

 

Andy

[Brianqpr]

Thanks for this, interesting info. It does seem that an under 55 solution is unlikely to be forthcoming. As for the transfer value, it has risen a lot over the last few years but who knows what the next valuation would be? I did read about DB values falling but then, when I got mine valued after that, it had gone up substantially again. The exchange rate is also a factor. We have had $3 to the pound in the not too distant past and, while it seems unlikely now, it is possible we could get to those sort of levels again. I have a feeling the $500k cap won't happen and that the cap amount is likely to be higher than that, maybe $1 million which is a much more reasonable level.

 

I have no previous NCCs.

 

Potentially moving into a UK based money purchase scheme could be an answer to capture an attractive transfer value and then hold until age 55?

[Brianqpr]

A thought that has just occurred to me. Surely SMSFs have the same risk of money being released if there is an excess contribution? Why therefore do over 55 SMSFs appear to be ok to remain on the ROPS list? I work in financial advice complaints/disputes and the majority of excess contribution problems occur in the over 55 age group.

[Adam from Vista Financial]

Hi Brian,

 

I work with Andy at Vista dealing with Home Loans. He is away on holiday at the moment but will repond to you on his return next week.

 

Thanks

 

Adam

[Andrew from Vista Financial]

A thought that has just occurred to me. Surely SMSFs have the same risk of money being released if there is an excess contribution? Why therefore do over 55 SMSFs appear to be ok to remain on the ROPS list? I work in financial advice complaints/disputes and the majority of excess contribution problems occur in the over 55 age group.

 

 

Hello Brian

 

I'm back from holiday!

 

Interesting that you work in financial advice complaints...is this for FOS?

 

HMRC introduced the pensions age test that was the initial thorn in the side for all of this, the reason that a SMSF for over 55s can meet the pensions age test is that the UK are only concerned with people accessing monies before retirement age currently age 55 therefore people over this age would have been able to access their monies if left in the UK anyway.

[Andrew from Vista Financial]

Thanks for this, interesting info. It does seem that an under 55 solution is unlikely to be forthcoming. As for the transfer value, it has risen a lot over the last few years but who knows what the next valuation would be? I did read about DB values falling but then, when I got mine valued after that, it had gone up substantially again. The exchange rate is also a factor. We have had $3 to the pound in the not too distant past and, while it seems unlikely now, it is possible we could get to those sort of levels again. I have a feeling the $500k cap won't happen and that the cap amount is likely to be higher than that, maybe $1 million which is a much more reasonable level.

 

I have no previous NCCs.

 

Potentially moving into a UK based money purchase scheme could be an answer to capture an attractive transfer value and then hold until age 55?

 

 

Even if the exchange rate went back to $3 and the $500,000 cap was introduced given that you have no previous NCCs it still seems possible to bring the money over and not breach the cap taking into account the way that the ATO currently assess foreign super transfers.

 

Yes I agree that potentially looking at taking advice now on moving out could be a sensible option given the currently high CETVs, this could be either to a SIPP or QROPS ex Australia with a view to bringing across to Australia when the timing is right.

 

Not sure if you are aware but you will need advice in the first instance from an appropriately qualified and FCA regulated Adviser as you are considering moving out of a Defined Benefit Scheme as this is now a mandatory requirement.

 

If you do wish to consider this and require assistance please let me know and I will be able to introduce you to our UK Associates.

 

 

Regards

 

 

Andy

[taggstigress]

We are moving in November. We both have a UK State Pension. (I know they will be frozen). I have a Teachers Pension and my husband has some small private pensions. Can anyone advise? They could continue to be paid into our UK bank or sent direct. Which is best?

[Andrew from Vista Financial]

We are moving in November. We both have a UK State Pension. (I know they will be frozen). I have a Teachers Pension and my husband has some small private pensions. Can anyone advise? They could continue to be paid into our UK bank or sent direct. Which is best?

 

 

Hello taggstigress

 

This thread is regarding transferring the actual pension fund to Australia.

 

Your question is in relation to where you should receive the pension payments.

 

In any event the answer to this will be based on whether you need the income or not really and whether Teachers Pension and the Private Pension providers will pay directly to Oz (the State Pension can be).

 

If you need the money then that really answers your question I suppose but if not then given the current exchange rates (might be different when you are here) it could be worth leaving the money in the UK until you either need the money or the exchange rate improves.

 

Kind regards

 

Andy

[screwge84]

Hi Andy,

 

Appreciate the advice you've been providing so far.

 

I'm quite confused (and concerned) about the whole process of transferring a UK pension to Australia and hope you can simplify it for a financial simpleton like me.

 

I'm originally Australian and started working in London at the beginning of 2015. I contribute extra money into my UK pension (as part of my employer benefit scheme) and my employer matches this too. I'm 32 and thought I was being responsible by doing this instead of taking cash bonuses and have accrued about £10k in my UK pension to date. I'm planning to emigrate back to Oz in about 18 months and had the intention of transferring my UK pension to my Australian super (BT). Am I correct in thinking that this is no longer possible?

 

I also thought there was only one private super provider that was exempt but there appears to be a substantial list on the HMRC site (surprisingly BT isn't on there): https://www.gov.uk/government/publications/list-of-qualifying-recognised-overseas-pension-schemes-qrops/list-of-recognised-overseas-pension-schemes-notifications#australia

 

My employer benefits scheme is up for renewal so I'm considering taking the cash bonus and manually putting it into my Australian super. It's

 

Help! What should I do??

 

Luke

[Andrew from Vista Financial]

Hi Luke

 

Yes unfortunately it is not possible to transfer a UK pension directly to a public offer Australian Super Fund for a person who is under age 55.

 

Once over age 55 it is currently possible however given your age it is likely that there will be many legislative changes in between this time.

 

Regards

 

Andy

[screwge84]

Appreciate your response, Andy.

 

I was under the impression it may be possible but I'd take a 55% hit when transferring but assuming this might be the case for over 55s.

 

I think I'd be better off taking my benefit in a smaller cash amount and sending it back to my Australian Super so at least I know it's safe.

 

Thanks,

 

Luke

 

Hi Luke

 

Yes unfortunately it is not possible to transfer a UK pension directly to a public offer Australian Super Fund for a person who is under age 55.

 

Once over age 55 it is currently possible however given your age it is likely that there will be many legislative changes in between this time.

 

Regards

 

Andy

[Andrew from Vista Financial]

Appreciate your response, Andy.

 

I was under the impression it may be possible but I'd take a 55% hit when transferring but assuming this might be the case for over 55s.

 

I think I'd be better off taking my benefit in a smaller cash amount and sending it back to my Australian Super so at least I know it's safe.

 

Thanks,

 

Luke

 

That's ok Luke, no if over age 55 pensions can be transferred to an Australian QROPS without a UK tax charge, the 55% applies to anyone any age transferring to a non QROPS.

 

It is unlikely that any UK scheme would transfer to a non QROPS for members under age 55 (no public offer QROPS exist for under 55s in Australia) as they would also be hit with a scheme sanction charge.

 

Regarding be better off sending it to Oz, not necessarily, you are likely receiving some tax incentive for paying into your pension, taking that money an paying into an Australia super fund is not going to be tax efficient.

 

There is also the exchange rate to consider, GBP is very weak v AuDollar at the moment.

 

Your comment about it being safe here, I would not class the UK pension system as being unsafe!

 

 

HTH

 

Regards

 

Andy

[screwge84]

Thanks very much Andy.

 

They're good points you raise. I just feel like if I go back to Australia then sorting out pension/super would be easier if it was all held locally and I'd be less likely to forget my UK pension later down the track. After reading your post I think I'll keep topping up my pension in the UK and keep an eye on the pension transfer scheme over the coming years. I do hope they change it soon.

 

Luke

 

That's ok Luke, no if over age 55 pensions can be transferred to an Australian QROPS without a UK tax charge, the 55% applies to anyone any age transferring to a non QROPS.

 

It is unlikely that any UK scheme would transfer to a non QROPS for members under age 55 (no public offer QROPS exist for under 55s in Australia) as they would also be hit with a scheme sanction charge.

 

Regarding be better off sending it to Oz, not necessarily, you are likely receiving some tax incentive for paying into your pension, taking that money an paying into an Australia super fund is not going to be tax efficient.

 

There is also the exchange rate to consider, GBP is very weak v AuDollar at the moment.

 

Your comment about it being safe here, I would not class the UK pension system as being unsafe!

 

 

HTH

 

Regards

 

Andy

[tigger]

Hi Andy,

My mother receives a modest spouses pension from Lloyds bank. It used to be taxed as 'NT' in the UK as she pays Australian tax on it but the last payment she received was taxed in the UK as well.

Is this related somehow to the latest changes - the timing seems suspicious. 

She is 95 and has been in Australia for 20 years as a PR. Of course her state pension is as it was on the day she arrived and this company pension is very important to her.

Also - on a side-note - is it worth her looking into transferring that pension here ?  The value is minimal and at that age she would be reluctant to change things for little gain.

 

Thanks,

Russ.

 

 

 

 

 

 

[Andrew from Vista Financial]

Hi Russ

No this wouldn't be related.

I would suggest that she get in touch with them direct to investigate.

Regards transferring it here, is it a pension income for life, I assume it is given her age?

If so then it cannot be transferred as it is in payment.

Hope this helps Russ.

 

[tigger]

Thanks Andrew - It looks like the fund changed administrators around that time, sounds like it's just admin related. 

[Andrew from Vista Financial]

Glad you have sorted it

[jamiewarren1981]

Hi there,

I am bit confused whether I am able to transfer my pension to Australian super or if I have to leave it in the U.K.

I am a 35 year old teacher and have made 11 years contributions to the Teachers' Pension Scheme. I am moving to NSW and have read that the usual Super Fund for teachers in NSW is First State Super. Is it possible to transfer the money I have accrued in the U.K. to Australia or do I have to wait until I am older?

I am a bit confused by the whole situation, although it's not putting me off moving.

Many thanks,

Jamie


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[Andrew from Vista Financial]

Hello Jamie

People cannot transfer private pensions to Australia now until they are at least 55 years old due to UK legislation changes that took place in April 2015.

People under age 55 who have moved to Australia should review their existing arrangements to ensure that they are structured appropriately and if not consider addressing things.

However as you are in the Teachers' Pension Scheme which is a government unfunded scheme, a transfer out of such a scheme is typically not possible in any event and this was also due to the April 15 legislation changes.

Therefore on this basis you will need to wait until the scheme normal retirement age (NRA) until such time as you can access your accrued benefits, you should also keep them up to date with your contact details.

Hope this helps Jamie.

Regards Andy

  

[jamiewarren1981]

Thanks, Andy. That was very helpful.

Kind regards,

Jamie


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