UK pension transfer door begins to open
Pension transfers from the UK may be set to re-open at least for people aged over 55 with UK authorities approving the addition of the first superannuation fund to meet its new rules since removing all but one fund in early July.
The new fund, a self-managed superannuation fund (SMSF) titled ‘P Wyns Age 55 Super Fund', was added to the list of funds deemed capable of accepting a UK pension by UK tax authority HMRC.
To be added to the list the fund would have been required to meet a Pension Age Test where members of the fund are restricted from accessing fund before age 55 except in the case of ill-health.
This is at odds with Australian law which requires superannuation funds to offer early access to those under age 55 for a number of conditions of release including financial hardship and compassionate grounds, which resulted in all but one of 1660 funds removed from the list of eligible funds to receive transfers.
These rules were introduced in the UK from 6 April this year and any transfers to non-complying funds could result in 55 per cent tax levied by HMRC on outgoing funds.
Vista Financial Services, director and planner, Andrew Williams, said the addition of a new fund, particularly a self-managed vehicle, indicated there was a way for British ex-pats currently aged 55 and over to transfer funds into the Australian superannuation environment.
"An SMSF is an obvious solution and the only cost is the fund setup, with meeting the HMRC criteria having no cost to the fund," Williams said.
Williams, who is based in Adelaide and services a large UK ex-pat client base, said the process in setting up the SMSF and getting the fund on the Recognised Overseas Pension Scheme (ROPS) list took around six to eight weeks from application to approval.
While not providing advice to the person who created the fund, Williams said he was aware of the person involved and believes they set up the SMSF without financial advice.
He said while this may open the door to some it should not be seen as a mass market solution and any advice around SMSFs for UK pension transfers had to meet the client's best interests. At the same time certain pension types also required, in the first instance, specific advice from a UK adviser authorised to provide pension transfer advice.
Williams said he has spoken to superannuation providers and was informed they were working on the issue, via Treasury and ASFA, but were restricted under Australian law from separate early release rules for different members.
He also said HMRC were aware of Australian law and had rejected some retail and self-managed funds which had made changes to trust deeds to allow transfers to proceed.
"We do hope to see a solution in the retail superannuation space and that may require new products to come out. In my conversations with product providers they are unsure if and when they can do that. It will depend on inflows and what it is worth to them."
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