Andrew from Vista Financial

Government Response to UK Pension Ban to Australia (QROPS)

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    As you may or may not be aware there are changes afoot to the UK pension system and in particular the Government had announced the possibility of a Ban on Pension transfers.

     

    See Thread: Proposals to Ban Pension Transfers

     

    Following the announcement they conducted a consultation and as a result of this it was stipulated that there would be a Ban on Pension transfers from Un-funded Government Defined Benefit Pensions for example NHS, Police and Armed Forces:

     

    See Thread: Outcome of Government consultation regarding Pension Transfer Ban

     

    My opinion on this has always been that a transfer of a Pension to Australia should not be done on the basis of a possible ban as it does not affect ones actual pension benefits and these changes do not put them at risk.

     

    A transfer should be done under the right circumstances after fully investigating the implications of leaving against transferring based on your individual situation.

     

    I also have continued to highlight that there will still be situations where transfers are able to continue based on the ‘very limited circumstances’ definition and that this could very well mean a person who is living overseas ie in Australia may fall into this definition.

     

    However there does not seem to be exact details of what this ‘limited circumstance’ definition entails in any of the publications released by Government.

     

    I think that the way Government have dealt with this is atrocious as lots of people are feeling the pressure of these changes without being allowed much breathing space.

     

    Therefore I contacted HM Treasury to firstly express my concerns that there are a lot of expats rushing into transferring pensions purely based on a potential ban mainly fuelled by Pension Transfer Companies/Banks/Advisers coercing people to do so and to try to get an explanation of what these limited circumstances are.

     

    Their response as follows:

     

    “Dear Andrew

     

    Thank you for your email dated 26 August in relation to the Freedom and Choice in Pensions consultation, and in particular, for your query in relation to transfers to overseas pension schemes and the limited circumstances under which the transfer ban for unfunded public service schemes may not apply, and for highlighting your concerns in this area. The DWP has passed on your email to the Treasury.

     

    Government will set out in legislation in due course the limited circumstances under which transfers out of unfunded public service pension schemes to defined contribution schemes will be allowed.

     

    The government recognises that the changes to the pensions tax rules will have implications for the rules relating to Qualifying Recognised Overseas Pension Schemes (QROPS). The Government will consider these implications further to ensure that the rules relating to QROPS are appropriate when the new system comes into force.

     

    I hope this is helpful and thank you for taking the trouble to make us aware of your concerns”.

     

    Yours

    HM Treasury

     

    Again we are still no clearer on this however as you will see there is going to be further consideration in relation to QROPS which are essentially Pension Transfers Overseas (ie to Australia).

     

    Let’s hope that we can get this information from Government sooner rather than later so that anyone contemplating a transfer is able to do so purely on the merits of where their retirement monies might be best placed as opposed to feeling pressured into doing so .

     

    Obviously although my opinion is that they may still be allowed it is still unknown and so if you are considering a transfer and a ban does come into effect the effective date is April 2015.

     

    As always I will keep members abreast of any further changes/announcements.

     

    Regards

     

    Andy

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    Unfortunately as of yet the UK Government have failed to address this area.

     

    Having again read through the reply email I received from Treasury the section that states this will be addressed (below) there is actually not a date that they have given as to when it will be addressed and the assumptions seemed to be that it would covered in the Chancellors Autumn statement which happened last week:

     

    "The government recognises that the changes to the pensions tax rules will have implications for the rules relating to Qualifying Recognised Overseas Pension Schemes (QROPS). The Government will consider these implications further to ensure that the rules relating to QROPS are appropriate when the new system comes into force".

     

    So unfortunately it seems that people will have to make a decision based on what is currently known albeit there may be a chance they will still be allowed to continue however this really does put some people up against it now with just under 4 months to go.

     

    I have written a reply email to Treasury to ask if they can give some further clarification on this and when details might be provided.

     

    Regards

     

    Andy

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    So latest correspondence from HM Treasury (in bold) to my email below:

     

    "Hello.

     

    Following on from our previous email interchange I wonder if you are able to clarify yet whether people living overseas will fall under the limited circumstance definition so as to allow them to continue to be able to transfer?

     

    As said previously I am involved with the UK expat community all over Australia and it is becoming very apparent that people are panicking about:

     

     

    1. The fact that they will not be able to transfer after April 15; and
    2. Believe as are being told by many banks and transfer companies that if they do not transfer they will lose their pension (this is a common theme on forums and facebook groups for UK expats across Australia).

     

     

    We have also recently spoken to NHS England and Scotland and have been told that there is a major backlog of enquiries to send transfer values from people in Australia and New Zealand looking to transfer (Before it is too late!!!)

     

    Surely this is not what was intending when the announcement was made and is probably going against the very reason that decision was made to ban transfer for fear of people transferring out and costing the Government monies they do not have??

     

    Finally is it possible to confirm that if a ban does also apply to people living overseas, does the ban mean that:

     

     

    • monies will have to be paid prior to this date? or
    • authority to transfer received prior to this date?

     

     

    Many thanks and I look forward to your reply".

     

     

     

    Governments response as follows:

     

     

    Dear Mr Williams

    Thank you for your email in relation to the restrictions on transfers out of unfunded, defined benefit, public service pension schemes to schemes from which is possible to obtain flexible benefits and the implications of these restrictions on Qualifying Recognised Overseas Pension Schemes (QROPS). I would like to apologise for the delay you have experienced in receiving a response to your correspondence.

     

    Government is still considering the detail and implications of any exceptions to the transfer restrictions which are being introduced and appreciates that the changes to the tax and transfer rules will have implications for QROPS. As I mentioned previously, the Government will set out in legislation in due course the limited circumstances under which transfers out of unfunded, defined benefit, public service pension schemes to schemes from which flexible benefits can be obtained, will be allowed.

     

    Thank you for keeping in touch on this issue and I hope that this response has been helpful.

     

     

    So unfortunately still none the wiser and I do not think that they could really leave it any later, could we take from this a positive that it does not specify that QROPS will not be seen under the limited circumstances definition (not sure)??

     

     

    Andy

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