An Australian trade body has written to HM Revenue and Customs to ask for an exemption in the UK’s qualifying recognised overseas pensions rules for superannuation funds, following changes that have come about under its pension age test.
The Law Council of Australia’s letter, dated 16 June and seen by FTAdviser, stated what it understood to be the new requirements to be and asked HMRC to “assist” in overcoming difficulties that surrounded the changes.
It also sought confirmation that Australian rules that apply to superannuation funds are consistent with the new rules. The committee asked HMRC to confirm under what circumstances a UK pension transfer amount can be paid to a member prior to 55 years of age.
Under the pension age test, schemes are required to assert savers are not able to access funds before the age of 55, except in cases of extreme ill health in line with UK law. Savers can access funds earlier under Australian law in a wider range of circumstances, such as financial hardship.
Following a letter sent my HMRC seeking to enforce the rules, transfers have been halted to some schemes and there has been speculation that transfers which have taken place since April 6, when pension freedoms came into force, may be deemed ‘unauthorised’ and trigger penalties.
FTAdviser asked the Association of Superannuation Funds of Australia its position on the current situation with Qrops earlier this week.
A spokesperson said: “The change to the Qrops requirements have had an impact on Australian funds and more importantly on UK citizens who have recently transferred pension account balances to Australia or intend to do so.
“While each fund is determining their best course of action, we understand a significant number of funds have indicated that they will not accept any further transfers from the UK until future notice.
“There is still confusion as to how the Qrops changes impact on transfers made since 6 April this year and the United Kingdom government needs to provide certainty as soon as possible.
“ASFA is concerned that the scope of these changes may have unintended consequences for thousands of people’s retirement, including the imposition of penalty tax on individuals who transferred account balances in good faith.”
The spokesperson added that ASFA was working closely with the Australian government to ensure a speedy and sensible response by the UK government.
The spokesperson for the Australian scheme MLC Super, added: “The new rules require that Qrops do not offer access to transferred UK funds before the age of 55, unless the member retires because of ill-health.
“This requirement presents an issue for Australian Qrops however, as under Australian legislation there are other types of early release (i.e. financial hardship, compassionate grounds).”
MLC Super added that industry bodies the Financial Services Council and ASFA have raised Qrops concerns with Australian Treasury and that it was investigating the impact of the Pension Age Test requirements to its products.
“As an interim measure, we’re placing a hold on the completion of any further paperwork with UK pension schemes, until we have clarity around the impact of these changes. Many UK pension schemes have also placed a hold on transferring UK pension benefits to Australian Qrops.
It became clear that Australian pension schemes could no longer meet the compliance definition to qualify as registered overseas pension schemes after a letter sent by HMRC backdating new regulations brought in following pension access reforms was sent in May this year.
Most recently, HMRC has suspended the list of notifications on recognised overseas pensions schemes, a list which formerly know as the qualifying recognised overseas pension schemes list.
HMRC declined to comment.
ruth.gillbe@ft.com, peter.walker@ft.com