QROPS - Qualified Recognised Overseas Pension Schemes (2006-15)
ROPS - Recognised Overseas Pension Schemes (2015-present)
To determine whether your UK pension is eligible for transfer under the new (2015 regulations) please refer to the eligibility criteria below. QROPS transfers can be complex and time consuming, with ever-changing QROPS/ROPS and tax regulations. For a summary of the 2015 QROPS changes, download our Free UK Pensions E-book.
Breaking News 9 March 2017: QROPS transfers to New Zealand, Malta, Guernsey, Isle of Man etc will now incur a tax charge of 25% on the total transfer value if the individual does not reside in the same country as the QROPS - click here for more details.
We recommend seeking expert QROPS advice before making any decisions about a UK pension transfer. The goal of this advice is to determine whether or not a transfer is financially beneficial to you, and if so, to structure the transfer in a compliant manner, free from potential UK tax penalties (HMRC can tax up to 55% of the transfer value for non-compliant transfers). Getting expert QROPS advice could potentially save you thousands of $$$ on your transfer - click here to see how.
Listen as Nik Hayes, a UK Chartered Accountant, speaks about why expert QROPS advice was needed to bring his own UK pension to Australia, despite having significant financial knowledge himself. We can facilitate an integrated global solution, incorporating UK advice (if required) from FCA licenced UK advisers, known specialists and leaders within the UK transfer marketplace.
Eligibility of UK Pensions for transfer to Australia as a lump sum:
Note: UK State Pensions (Old Age Pensions - from your National Insurance contributions) CANNOT BE TRANSFERRED as a lump sum (i.e. are not eligible for transfer) - here is a link to find your State Pension Information
Most personal, company and civil service (i.e. funded public sector) pensions can be transferred as a lump sum if the member is aged 55 yrs or over and:
The fund has NOT yet begun paying a pension payment or annuity (excluding draw down pensions)
The funds are transferred into an Australian Superannuation fund on the HMRC ROPS List. A viable option currently is to set up a SMSF with appropriate trust deeds – click here for more details.
For SMSF set up in Australia, the member must be currently residing in Australia and transfers are only recommended for people with permanent residency or citizenship status in Australia. A minimum transfer value of £100k is required for SMSF set up.
Age Considerations for Eligibility:
You must be aged 55 yrs or over to transfer UK pensions as a lump sum to Australia
For funded Civil Service/Public Sector Pensions that are eligible for transfer (eg. Local Govt Pensions Schemes and USS/Universities Super Scheme) you must complete the transfer prior to turning 60 yrs old - (we recommend getting transfer quotes at least 9mths prior to your 60th birthday to allow sufficient time to transfer.)
Many UK schemes begin making pension payments upon the Normal Retirement Date listed on your policy (usually age 60 or 65yrs – but it can vary so check your policy). If payments begin, your pension will no longer be eligible for transfer as a lump sum.
UK Schemes NOT ELIGIBLE for transfer:
Effective from 6 April 2015, unfunded Civil Service Schemes can not be transferred as a lump sum - this includes schemes like NHS, Teachers, Police, Firefighters and Armed Forces.
UK State/Old Pensions (from National Insurance contributions)
HISTORY OF QROPS:
Since April 2006, the term QROPS (Qualified Recognised Overseas Pension Scheme) has referred to the HM Revenue & Customs (HMRC) approved list of pension schemes based outside the UK. To transfer a UK pension out of the UK as a lump sum, HMRC has required such transfers to be made only into QROPS and failure to do so could result in an unauthorized payment tax of up to 55% of the total transfer value.
Since QROPS first hit the market on 6 April 2006, Australia led the way, hosting the most schemes, which is logical given that Australia is the most popular destination for British expatriates. Recent estimates show 1.3M UK expatriates living in Australia and an estimated 43,000 new UK migrants arriving each year. In April 2015, Australia had 1,654 pension schemes on the HMRC QROPS List (making up 41% of the global market) and Ireland was the second largest centre with 787 QROPS (comprising 21% of the market).
From 1 July 2015, the HMRC QROPS List was renamed the HMRC ROPS List - 'Recognised Overseas Pension Schemes'. Effective from this date, some 3000 QROPS globally were removed from the list (including 1653 from Australia alone - effectively delisting Australia as a QROPS destination, along with 7 other jurisdictions around the world).
Furthermore, HMRC do not guarantee that schemes on the ROPS list are approved or qualified for UK pension transfers, therefore, it is the member's responsibility to ensure the overseas scheme meets all the necessary HMRC requirements, as such, it is imperative for members to seek specialist advice on QROPS transfers to ensure the HMRC penalty tax of up to 55% of the total transfer value is not incurred. The following caveat appears on the HMRC website -
"HM Revenue and Customs (HMRC) can’t guarantee these are Recognised Overseas Pension Schemes (ROPS) or that any transfers to them will be free of UK tax. It is your responsibility to find out if you have to pay tax on any transfer of pension savings."
To make a compliant UK pension transfer (thus reducing exposure to potential tax penalities of up to 55% on the total transfer value) you must transfer into a QROPS/ROPS fund. The most popular QROPS centres in the world (prior to the recent 'Freedom & Choice in Pensions' legislative changes) have included Australia, Ireland and New Zealand, who together comprised 63% of the global QROPS market.
2015 QROPS Situation Summary:
New UK pension regulations came into effect on 6 April 2015 as part of the 'Freedom & Choice in Pensions' legislation. The main section causing difficulties for Australian QROPS funds has been the UK Pension Age Test, which states that no one aged below minimum pension age of 55yrs can draw from their retirement savings, except in the exceptional circumstance of severe ill health.
Australian superannuation schemes, wishing to retain their QROPS status, had worked diligently (during April and May 2015) to amend their trust deeds to comply with these new UK requirements (the deadline for compliance was June 17th 2015).
Many Australian schemes met this deadline with appropriately updated trust deeds and therefore expected to appear on the updated 1 July ROPS list.
However, by June 29, 2015 it was apparent that HMRC did not intend to place any (public offer) Australian fund on the QROPS/ROPS list. The apparent reasoning by HMRC (for Australia) was due to Australian statutory law allowing for payments of superannuation to people under the age of 55 in certain circumstances - in addition to severe ill health - (e.g. severe financial hardship) and HMRC's possible view that the statutory law could take precedence over trust law (governing the amended trust deeds of many Australian schemes).
Consequently, on 1 July 2015, 1653 Australian QROPS were delisted as breaching the rules by HMRC. Many of the 1653 Australian schemes with QROPS status prior to 6 April 2015 were hopeful of regaining their status once again, however, as more time passes, the less likely it appears that a resolution will be found. Australian Treasury and HMRC have been negotiating a resolution to this issue and there had been hope that a positive outcome for all concerned could be found.