With all the pension changes happening in the UK, Australian advisors on transfers to Australian QROPS are going to have a number of new aspects to address. This is a bit of a round-up of those matters.
UK Data Protection Act 1998 Increasingly UK funds will not release information to an Australian financial planner – even if they have an authority from the client to do so. This is not a major problem as the client can simply forward copies of the information.
Public Service Unfunded Defined Benefits December 2014 saw the Pension Scheme Bill complete its “Commons” stages. This has a restriction on a member of an unfunded public service defined benefit scheme like NHS Pension from transferring out to an accumulation arrangement. It is going to be important to be able to structure Australian clients’ affairs tax efficiently with this constraint i.e. more UK pension payments than previously.
Non Advisors DB Transfers The new bill requires trustees of funds to check that defined benefit members have received independent advice – presumably from a UK registered, independent financial adviser. There is a small possibility that an overseas adviser may be acceptable – Steve Webb (the Minister of State for Work and Pensions) said that the Financial Conduct Authority would clarify this in due course. This will be an additional hurdle for Australians wishing to consolidate their retirement funds to Australia.
Increase Benefit Flexibility From 6th April 2015 members of a QROPS who have reached their minimum retirement age (usually 55) will be able to take a 100% lump sum withdrawal. Currently a QROPS holder is required to use 70% of the funds in their scheme to provide an income for life. This will apply to past QROPS monies.
Previously Exempt Amounts Monies moved from one overseas super fund to another overseas super fund are – since 1st July, 2004 – exempt until they are eventually transferred to Australia. These records are not being maintained diligently by many expats, and needs to be fixed.
Deductible Amounts If more people are going to be forced to receive some overseas entitlements in assessable pension format, ensuring that the appropriate deductible amount is claimed becomes important.
Value of UK State Pension Voluntary Contributions With the changes to UK State Pension conditions, the value of making voluntary contributions needs to be re-evaluated.
I predict it is going to be at least six months before the rather confused current environment has more clarity.
The NetActuary Team