HMRC’s rules for UK-Australian pension transfers have come under fire from experts, who accuse the taxman of running a policy of “no checks, based only on trust”.
Amid a rush of Australian recognised overseas pension funds re-entering the UK tax office’s list, following last year’s cull, there are concerns not all of the schemes meet HMRC’s and the Australian Tax Office’s rules.
Geraint Davies, managing director at Montfort International, said the current situation “makes it extremely difficult for anyone in the UK to give advice to transfer to an Australian scheme”.
“We still feel most of these Australian schemes are not compliant with UK rules – they will say that they are compliant with Australian rules.”
In Mr Davies’ view, the Australian Super Fund Lookup website states the Australian Tax Office can accept Australian transfers but this is not the standard the UK has set for transfers to Rops.
“UK rules come first and if you read them, they [these schemes] are not compliant. Safety first says apply for Rops status once you meet UK’s definition of a complying scheme. Anybody who thinks otherwise is dicing with danger.”
A spokesperson for HMRC said the Rops notification list shows pension schemes that have notified HMRC they meet the requirements, have undertaken to provide information and consented to appearing on the list.
Last year, the list of Australian recognised overseas pension funds was slashed, as HMRC confirmed to the Australia’s Treasury its superannuation funds no longer complied with UK rules under the new pension age test.
Superannuation funds have the facility to allow recognised overseas pensions. HMRC’s pension age test requires schemes to assert savers are not able to access funds before the age of 55 in line with UK law.
FTAdviser reported in October last year a superfund listed on the recognised overseas pensions list - P Wyns Age 55 Super Fund - is not compliant with the Australian tax office.
After the initial reintroduction of Australian Rops to HMRC’s list, the number from the country now total 137.
Nigel Darnley, technical services manager at London and Colonial, said transferring to an overseas scheme needs to be considered very carefully.
Funds which have the status ‘registered-not determined’ on the ATO’s search engine, are in a limbo, he said, where Australia has not yet determined whether it is compliant or non-compliant, which can make a huge difference to retirees’ tax bills.
“If it is compliant the tax rate is 15 per cent, if it is non-compliant it is 45 per cent.
“It may be that the scheme is fine, but if for some reason it is different, then there is a 30 per cent tax difference.”
He recommended advisers look at the ATO super fund website as well as HMRC’s list to establish whether the scheme is a Rops.
But Robin Ellison, consultant at Pinsent Masons, said an Australian superfund listed as of ‘not determined’ status does not mean it is ineligible to be recognised by HMRC, because this is an Australian status, not a UK one.
Superfunds will still need to complete the HMRC forms to show it is compliant for UK purposes, however, which often they are not, he said.
He blamed the confusion on a “dysfunctional“ HMRC overseas pensions policy, and called for the courts to intervene.
“HMRC is still applying obsolete UK pension policy to overseas schemes, while UK domestic policy through the pension freedoms has removed many of the former annuity and investment rules.”
ruth.gillbe@ft.com
