Due to recent HMRC changes Australian Super Funds could potentially lose their QROPS status and given this HMRC have directed UK Pension Providers to freeze any payments for pension transfers in progress until after at least the 17th June to ensure that no members are hit with unauthorised payment charges.
This is the date that existing QROPS Super Funds have to re-notify HMRC that they continue to meet the HMRC QROPS legislation.
We know that the NHS have received these HMRC directives and that they will not make any further payments until at least then when they can check to see if the receiving Australian scheme maintains QROPS status.
Below is a communication from one of the major QROPS Super Funds in Australia that we use regularly for Pension Transfers (referred to as Super Fund X), it also explains what the changes are that have lead to this:
What has changed?
Super Fund X is required to comply with recent UK law changes impacting Qualifying Recognised Overseas Pension Scheme (QROPS) requirements from 6 April 2015. Super Fund X has received a letter from HMRC (the UK’s tax office equivalent), requesting that we confirm compliance with these changes by 17 June 2015.
The changes include restricting members aged under 55 from accessing benefits transferred to a QROPS, unless the member satisfies HMRC’s definition of ill-health1. This impacts all Australian QROPS as Australian law allows payments to members aged under 55 in limited circumstances, including financial hardship, compassionate grounds, permanent incapacity or in accordance with a release authority relating to excess contributions.
How are we responding?
Our immediate action is to confirm that Super Fund X remains a QROPS, by progressing the following options:
1) Liaising with the FSC and other organisations that offer QROPS, to approach the HMRC directly to seek an exemption from this condition for Australian QROPS.
2) Confirming if superannuation and tax law permits us to change our scheme rules, so that members will only be able to access their QROPS monies after reaching age 55, or on the grounds of ill-health.
We understand that a consistent approach is being considered by some of our competitors who also offer QROPS.
Are there any concerns for members who transfer to Super Fund X before we confirm that it continues to be a QROPS?
If a transfer is made from 6 April 2015 to any superfund which does not confirm that it is a QROPS by 17 June 2015, then the HMRC could impose 55% tax on the value of the transfer.
We are taking a facilitative approach with HMRC to inform them of our approach, and to seek comfort that HMRC will not impose this tax on any transfers to Super Fund X.
As a further precautionary measure, we recommend advisers withhold transfers from UK funds to Super Fund X, until we have confirmed that Super Fund X remains a QROPS.
1 The UK regulation definition differs to the Australian law definition.
Vista Financial Services are in the process of contacting all of our clients in relation to this and will also be contacting the relevant UK Pension companies to ensure that they are also following HMRC directive to freeze payments, if you have any concerns about this you should speak to your Super Fund or Financial Adviser.