Write to Pensions Doctor with your pension problem: [email protected]. Columns are published weekly. Becky O’Connor is currently away.
Dear Charlene,
I have just been notified ahead of my 60th birthday, in a few weeks’ time, that my small but not insubstantial private pension is maturing. All the advice on what to do is related to UK residents.
I was anticipating this and expecting to transfer to my superannuation fund here in Australia via the qualifying recognised overseas pension scheme’s (Qrops) comparable provider compliance system.
I’ve made some initial inquiries and it seems like my super fund has dropped its compliance with Qrops.
Can you recommend the most tax efficient way of transferring my funds to Australia? If I have to pay tax on it to do so, I might as well pay a large chunk off our remaining mortgage rather than stow it into my pension.
Regards,
– Joe, Geelong, Australia
Dear Joe,
Although I can talk through what you need to consider and the pension rules, it’s important you get advice from an Australian tax professional.
I know tax is a key factor for you, but the costs of moving money between different countries, or finding or setting up a compliant pension scheme in Australia will also play a part in determining what the best course of action is for you personally.
Transfer considerations
One option you have started to explore is transferring your UK pension pot to an overseas Australian superannuation plan, or “super”.
The super must also qualify as a “recognised overseas pension scheme” or Qrops. If it’s not a Qrops, your UK pension scheme will usually refuse to make the transfer, to prevent you facing a UK unauthorised payment penalty of at least 40pc.
UK pensions cannot be accessed before age 55 unless you’re in ill health. In Australia, pension savers can potentially access their pots before then.
Back in 2015, HMRC confirmed that Australian schemes would need to either restrict membership to people over age 55 or prevent people transferring UK pensions Down Under before they reached age 55 if they wanted to keep their recognised status in the UK.
As a result, Australian residents who wanted to make qualifying transfers either had to find one of a handful of remaining schemes that met the rules, or set up their own, with all the considerable cost and responsibility of setting up and maintaining a pension scheme.
HMRC has a list of Australian schemes that have self-declared that they meet the UK rules, but that doesn’t automatically guarantee their Qrops status, and your UK scheme will still make some additional checks of their own if you do request a transfer.
Once Qrops status is established, there are some tax hoops to jump through both in the UK and Australia.
