The UK HMRC announced new rules for QROPS on December 6th, in the form of a consultation period which will end on January 31st.
The main proposed changes are:
- The reporting period to HMRC on events will be extended to 10 years of non-residency after the member transfers into QROPS (previously this was five years.)
- Payments by QROPS to be reported to HMRC within 60 days (this used to be a year.)
- No more than 30% of a QROPS to be taken as a lump sum.
- Reporting duties to continue for any scheme that ceases to be a QROPS
- Jurisdictions must apply the same tax exemption on pensions to residents and non-residents
So what are these changes trying to achieve and who are HMRC targeting.
The HMRC are clearly trying to target schemes and jurisdictions that are promoting strategies to rip money out of the pension environment and avoid tax especially for UK domicile persons.
The next area targeted is the New Zealand environment that allowed members to access 100% of the benefits and was potentially open to non New Zealand residents. By changing the rules so that New Zealand transferees had to be NZ residents this closes the loophole that non NZ residents were trying to exploit. New Zealand was the number one recipient of transfers.
The next area targeted is the tax havens such as Guernsey which is the second most popular destination for QROPS funds.
Tim Bush, director of Carey Group explains: “Guernsey Association of Pension Providers has been working in consultation with the Guernsey income tax authorities. A new draft law is being taken to the states of Guernsey and was debated on 7th of March. We’re very confident this will be passed and we’re very confident as a result of that change to the law, Guernsey will continue to be compliant with the requirements to run QROPS moving forward.”
So what about Australia? We believe that Australian residents aiming for legitimate homes for their pension should still be able to make transfers post April 2012. The 10 year reporting rule will prompt some, especially older members to try and get transfers completed before the April deadline. As Australian registered super funds are specifically mentioned in the draft proposals there should not be any extreme measures that would stop Australian funds continuing to be registered as QROPS.
Southern Cross Wealth Management has years of experience putting in place UK pension transfers for our clients. As we have a detailed understanding of the UK pension market and the Australian system we are able to provide comprehensive analysis of both sides of the transaction allowing our clients to make an informed decision whether a transfer is right for them.
We pride ourselves on being able to make a complex and sometimes baffling comparison a simple and easy to understand process.
In recent years we have seen the amount of pension transfers made to Australia reduce, we were finding that this was predominantly due to the strong Australian dollar which in effect devalued UK pension benefits significantly. We have overcome this by sourcing a UK QROPS provider that allows some or all of the transferred funds to remain in pounds.
This has allowed clients that believe the currency will move in their favor to hedge their bets and keep the funds in pound sterling while still enjoying the benefits of moving the funds into the Australian tax system.
While clients should be wary of making decisions based on draft legislation if you are considering a UK pension transfer then be aware of the issues and take advice on how they could effect your future plans.