Lack of guidance from pension regulators could see another massive cull of Australian QROPS, financial experts are warning.
In June 2015, the Australian QROPS market was devastated when hundreds of pensions failed the new flexible access pension age test.
Australia plunged from the world’s leading QROPS jurisdiction with 1,669 pensions to just one in a few weeks.
The problem was Australian superannuation pensions allowed retirement savers aged under 55 years old to take money from their pots, which was forbidden by UK rules introduced in April 2015.
Since then the number of Australia QROPS has recovered to 159, according to the HM Revenue and Customs (HMRC) QROPS List published on April 1. 2016.
Australia expat pensions may break rules
Now, some financial advisers are doubting if the revamped Australia QROPS meet HMRC rules in the UK.
HMRC says the list shows pensions that have self-certified that they meet UK QROPS rules and have provided information to support the claim.
However, some of the funds on the QROPS List are shown as ‘status not determined’ on the Australian Tax Office (ATO) superfund web site.
The problem for retirement savers is if they transfer a UK pension or funds from another QROPS to an Australian QROPS which is then shown to have failed the HMRC pension tests.
These transfers are treated as unauthorised withdrawals and face tax starting at 55% of the transfer fund value.
Expats cannot prove Australia QROPS status
However, retirement savers have no way of knowing if Australia QROPS pass the HMRC test and whether the ATO status is relevant to their transfer.
HMRC refuses to ‘approve’ QROPS pensions and insists retirement savers and their advisers should carry out the research to confirm their status.
Pension consultant Robin Ellison of UK legal firm Pinsent Mason explained the lawyers felt many Australia superfunds notify HMRC that they meet the qualifying rules when they do not.
“This means they are listed but not compliant as a UK QROPS pension,” he said.
“This is due to the way HMRC applies UK pension policy to overseas schemes.”
Flexible access is one of the issues that has led to a gulf between QROPS based within the European Economic Area – the European Union plus Iceland, Norway and Liechtenstein – and those in the rest of the world.
Within the EEA, QROPS can offer flexible access on the same basis as UK pensions, but outside the EEA, 70% of the fund is ring-fenced to pay pension benefits and flexible access is not allowed.
