QROPS Australia Guide 2015 for UK Pension Transfers to Australia

QROPS Australia Guide 2015 for UK Pension Transfers to QROPS


QROPS AUSTRALIA – UK pension transfers to QROPS in Australia have been closed, except one scheme, the Local Government Superannuation Scheme

Many Australian super pension schemes and Australian SMSF’s are no longer QROPS approved by HMRC thanks to a letter HMRC sent to Australian pension schemes on April 17th, 2015.

Due to new UK pension regulations, many Australian superannuation pension schemes and Australian SMSF’s no longer fulfill the requirement to be a QROPS Australia. Only one scheme remains on HMRC’s QROPS list for Australia, the Local Government Superannuation Scheme, also known as the LG Super.

The problem is that the LG Super scheme is an occupational pension scheme for Australians who have worked for the local council in Australia, so is unfit to allow transfers from UK pension schemes.

For British Expats Resident in Australia – A QROPS in Malta is the Best QROPS Choice

As most Brits can no longer transfer their UK pension schemes to Australia, the best alternative is to transfer a UK pension to a QROPS in Malta.

Why Transfer to a QROPS in Malta as a Resident in Australia?

  • No tax on growth in Malta
  • No tax on death, even after 75 years of age
  • You have total control over your investments
  • You have total control over which currency to invest in
  • You have total control over how your assets are distributed on death
  • 100% of your pension pot goes to your named beneficiaries on death, e.g. 50% to partner; 25% to first child; 25% to second child
  • You pay Australian income tax on your pension rather than UK tax

How do I transfer a UK pension to an Australian super fund?

If you held a British pension and then emigrated to Australia, you can transfer your pension to a QROPS in Australia if you meet certain conditions.

If you move your UK pension to Australia, you only pay 15% tax on the growth of your UK pension fund since you have been an Australian resident. Furthermore, this is automatically paid by the Australian Superannuation fund or SMSF in Australia should you choose.

Thanks to new rules which HMRC are requiring Aussie Supers and SMSF’s to follow though, many Australian QROPS now fail the requirements to be an approved QROPS, so you need to take care on choosing the correct HMRC approved QROPS.

Also, it is important to note that you have to wait five full tax years of continuous Australian tax residency outside the UK before you can withdraw from your fund solely under Australian rules; prior to that time withdrawals will be under both UK tax rules and Australian tax rules.

In many cases, we are recommending transferring to a QROPS in Malta first or keeping in a UK SIPP, especially where the member is unsure if they will retire in Australia, the UK or elsewhere.

Why transfer a UK pension to an Australian Superannuation Fund or SMSF in Australia?

The main reason is currency and lack of income taxation. Australian Supers face zero income tax after 60 years old. Also, you can transfer your pension to AUD to prevent your pension income moving up and down with exchange rates.

The downside is that within Australian pension schemes, you must take a 4% per year minimum at retirement age whereas in the UK, pensions are fully flexible, so minimum or maximum income that you can take. However, an Australian pension scheme will be more tax efficient and will be in Australian Dollars, so no currency fluctuations if you only invest in Australian funds.

Moving your UK retirement savings to Australia

Both British expats who have emigrated to Australia and Australian expatriates who have worked in the UK and now returning to Australia can no longer move their final salary of defined contribution British pension funds to Australia. You can access your UK State pension in Australia, although this will be frozen and not index-linked to inflation.

Who Can Apply for a UK Pension Transfer to a QROPS in Australia?

You can transfer a UK pension to an Australian superannuation fund as long as it is a QROPS (Qualifying Recognised Overseas Pension Scheme) in HMRC’s eyes in the UK.

This means that whether you are transferring a pension to an Australian Super or transferring a UK pension to a SMSF in Australia, it must comply with QROPS rules which are set by HMRC in the UK. Unfortunately, only one does.

So, now, you can only transfer to Australia if you have worked for the Australian government.

Which Australian Superannuation Pension Schemes and SMSF’s are QROPS?

Whether you want to move your UK pension to an Australian Self-Managed Superannuation Scheme (SMSF) or an Australian Superannuation scheme managed by an Australian investment adviser, they must qualify to be a Recognised Overseas Pension Scheme (ROPS).

An HMRC approved QROPS means:

You cannot access the pension before 55. Unfortunately, this rules out most large Australian Superannuation pension schemes and SMSF’s in Australia as they allow access before 55 if you fall on financial hardship. Unfortunately, this means that if you transfer to an unqualified SMSF in Australia, your pension transfer could face an unauthorised transfer tax charge of 55%.

If Aussie Supers and Australian SMSF’s don’t amend their trust deeds, they will no longer be deemed a QROPS. Seeing as the majority of their clients are Australian with only a small portion being British expats who have migrated to Australia, this could be unlikely.

Can I buy property with an Australian SMSF which is QROPS approved?

Yes and no. You cannot buy residential property with a QROPS or with an Australian SMSF. So, you can’t move your house into an SMSF. However, you can move commercial property into a QROPS or SMSF. So, you can move a shop house or hotel or hostel into an SMSF.

Normally, Individuals can be taxed up to a maximum rate of 46.5% on capital gains of a commercial property, or if the asset is held over 12 months, the tax is 23.25%.

However, capital gains in An Australian Superannuation fund or SMSF is taxed at a maximum of 15% tax, which reduces to 10% if you hold the property for over a year. Stamp duty may also be reduced.

How Do I Find Which Australian Pension Schemes are QROPS Approved?

You need to consult the most up-to-date QROPS Australia list which you can find on HMRC’s website.

Who Cannot Apply for a UK Pension Transfer to a QROPS in Australia?

UK pension transfers from a public sector defined benefit scheme to Australia desisted on April 6, 2015. That means no NHS pension transfers to Australia, no teachers’ pension transfers to Australia, no police pension transfers to Australia and no local government transfers to a Australia.

Unless, you transferred out of a public sector defined benefit scheme to a QROPS already or previously moved your pension to a private defined contribution scheme in the UK, you will not be able to transfer your pension overseas.

You cannot transfer a UK state pension scheme to a QROPS. A QROPS is for private sector defined benefit pension scheme transfers and defined contribution. A UK state pension can be paid into your Australian bank account though.

Who Can Apply for a UK Pension Transfer to a QROPS in Australia?

You must satisfy the first condition and one of the conditions below to transfer to a QROPS in Australia.

  • You must have worked for the Local Government in Australia and be a member of that pension scheme.
  • A British expat who lives in Australia: if you are born in the UK and now are a resident in Australia
  • Australian expats who have lived and worked in the UK: if you were born in Australia and have worked in the UK and meet the requirements here, you can transfer to a QROPS in Australia.
  • Any nationality who has worked in the UK and built up a substantial UK pension can transfer to a QROPS if they meet these requirements.
  • A QROPS is for private sector defined benefit pension scheme transfers and defined contribution pension scheme transfers.
  • You can transfer a final salary pension scheme to Australia as long as the pension scheme is not “in payment”. We can transfer it if you haven’t started taking your annual pension income yet. New rules mean that any final salary pension scheme transfer require sign off from a UK qualified financial adviser. Pensions which are “in payment” are much more difficult to transfer and must pay out the same pension income.
  • Most of the pension scheme transfers to Australia tend to be “money purchase” or “defined contribution schemes” from private pension companies in the UK such as Aviva or Prudential.

Moving a UK Pension to a QROPS in Malta May Be a Better Solution for Many

Due to the new rules which are being imposed on Australian Supers and Aussie SMSF’s, a pension transfer to a QROPS in Malta may be a better fit. Malta has a Double Taxation Agreement with Australia.

Who may benefit from a UK pension transfer to Malta rather than Australia?

A UK pension transfer to Australia cannot be transferred out. This can be a problem for people who move to Australia, but then decide they want to retire to the UK or elsewhere abroad. Malta has Double Taxation Agreements with over 60 countries around the world including Australia and the UK.

A Malta QROPS allows you to hold any currency of your choice and has a much wider range of acceptable investments than Australian QROPS.

Limits on Transfers to an Australian QROPS

  • Any pension pot above 1.25 m GBP will be taxed at 25% for the tax years 2014 & 2015 by HMRC
    Any pension pot above 1m GBP will be taxed at 25% from April 6th, 2016 by HMRC
  • The Australian Tax Office (ATO) will not allow payments of more than AUD 180,000 per year. If you are under age 65 you can use up to three years’ allowance at the same time, making a limit of AUD 540,000 over a three-year period with the limit brought forward.

It may make sense to set up a Malta QROPS first and then drip feed this into an Australian QROPS approved by HMRC when you get to retirement age. But, would depend on your age, pension pot size, health and many other factors.

Australian Pension Transfer Video

What is the Tax on an Aussie Super or Australian SMSF?

Please click here for the latest information from the Australian Tax Office (ATO) – Tax treatment of transfers from foreign super funds”.
Lump sums from a UK pension scheme to an Australian Super are taxed at 15% rather than the Australian marginal rate of tax.

Any tax attributable to a QROPS in Australia would normally be paid by the Aussie Superannuation scheme. In which case, you must fill out the “choice to have your Australian fund pay tax on a foreign super transfer form” (NAT 11724) and submit it to the Australian super fund.

Australian QROPS pay out pension income with no tax deducted after 60 years old.

A Malta QROPS can pay out a pension income from 55 years old. This can then drip feed into an Australian QROPS after 60 years old or paid directly to your Australian bank account at 55 years old where you would pay your highest marginal rate of Australian income tax on the payments you receive. Any money transferred to a Malta QROPS defers taxes until you take the benefits in Australia.