Australia Qualifying Recognised Overseas Pension Schemes (QROPS) are the subject of a lot of speculation – and unfortunately much is misinformed.
Australia was the largest QROPS centre until June 2015, when UK pension rules changed to exclude anyone from under 55 years old from accessing their pension before the minimum retirement age.
Australia was hosting more than 3,000 QROPS at the time – and in June this dropped to just one local government scheme.
Since then, Australian pension providers have opened more than 80 new schemes.
Are the new Australian QROPS legal?
No one knows for sure. HM Revenue and Customs (HMRC) in the UK is the arbiter of QROPS status and has not approved any of the pensions.
However, many of the new schemes are relying on the fact that they allow no one under 55 years old to join their QROPS. This works around Australian rules that allow QROPS investors under 55 to withdraw cash early because they have no one under 55 belonging to the scheme.
No doubt, the providers have taken legal advice and believe their schemes meet the demands of HMRC.
Will I pay tax if I transfer to a new Australian QROPS?
No – providing the scheme is a bona fide QROPS. It’s up to you as the retirement saver to check the scheme really is a QROPS.
If the pension is later found to have broken QROPS rules, you could face a tax penalty starting at 55% of the value of your fund.
However, if you have transferred money in and the rules change as in June and the pension loses QROPS status but savers do not have to pay tax penalties.
The rule of thumb is if it was a QROPS and the rules changed to exclude the scheme, then that’s a no fault event and no penalties are due.
Is there another way to have a QROPS in Australia?
Yes. Some QROPS centres, such as Malta, Gibraltar and the Isle of Man allow retirement savers to set up a QROPS with them regardless of where they live in the world.
It’s perfectly OK to open a QROPS in one of these centres while living in Australia.
These pensions have a minimum retirement age of 55 and do not allow younger members to take cash other than in exceptional circumstances which is compliant with HMRC pension rules.