Archive for December, 2009

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Pension Transfer to Australia – Can I contribute to my UK scheme from Australia?

Thursday, December 31st, 2009

Often an individual, who is migrating to Australia, will contribute to their UK pension pre-migration – taking advantage of the UK tax relief on contributions – and then they would affect a pension transfer to Australia at a later date in order to take advantage of the Australian QROPS  tax benefits in retirement, in Australia.

As is the case on so many occasions, with the cost of migration increasing, most people do not have the spare funds to contribute to a UK pension pre migration – no matter what the tax breaks may be. This results in a UK pension transfer to Australia being completed without maximum advantage taken from UK tax relief.

For an individual already in Australia, whose proposed UK pension transfer to Australia is not underway, there may still be an opportunity to contribute to the UK pension.

If an individual is deemed to be a relevant individual ie has relevant earnings chargeable to UK tax in that tax year, is a crown servant abroad with earnings subject to UK tax (a diplomat or soldier, for example) or has been resident in the UK in that tax year (or any of the previous 5 tax years) – a contribution could be made to an existing UK pension.

Global QROPS Ltd would like to point out, however, even if the pension member is a ‘relevant individual’ it would still depend on the pension member’s provider as to whether the individual could still contribute. If the relevant individual has no UK earnings, the likelihood is that the UK tax relief on contribution would be restricted to £3,600 per annum (should the UK provider allow the contribution).

Pension members, migrating to Australia, should take advice from Global QROPS Ltd before regarding their additional contribution options.

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Can my Child’s Pension Transfer to a QROPS?

Monday, December 28th, 2009

From 6th April 2006, just about anyone with a UK pension can transfer to an overseas pension scheme – providing, of course, the overseas scheme is an approved QROPS (Qualifying Recognized Overseas Pension Scheme).

Since the Defined Contribution regime was introduced in the Finance Act 2000, an individual could make a UK pension contribution, on behalf of another individual, from 6th April 2001. These were known as Third Party contributions.

Also introduced in 2001 was the removal of the minimum age that an individual needed to be to become a member of a UK personal pension (or stakeholder).

Often taking advantage of these rules were grandparents or parents looking to make a contribution on behalf of a child. As a result, since 2001, there are many minors who have accrued pension funds.

It is often the case, that when a family migrates, all family members (including the children) would have accrued pension funds in the UK. Therefore, when Global QROPS Ltd are asked to advise about UK pension transfers to QROPS, the question arises about whether a child’s pension plan can transfer to a QROPS?

Theoretically, the answer to this question is ‘yes’. Her Majesty’s Revenue and Customs (HMRC) have not applied any restrictions on such a transfer (providing the receiving scheme is QROPS). However, there are plenty of considerations first.

For example, do overseas pension schemes have their own minimum age restrictions for pension membership? Is there value for the UK fund in being transferred to a QROPS (now or in the future)? – The answer to this could depend on factors such as the overseas pension scheme charges or the fund size.

Global QROPS Ltd are able to provide advice on all aspects of overseas pension transfers.

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UK Pension Transfers to New Zealand QROPS – Tax rates

Friday, December 25th, 2009

People that consider migrating (or returning) to New Zealand from the UK, who are members of UK personal or employer sponsored pension schemes, often speak to Global QROPS Ltd regarding the best retirement planning advice regarding their pensions.

For all members of UK pension schemes, the QROPS (Qualifying Recognized Overseas Pension Scheme) transfer option is available.

If you transfer your UK personal or employer pension to a New Zealand QROPS, and you are a resident of New Zealand at retirement, those benefits would be paid to you tax free.

What happens, however, if you are resident of New Zealand and decide not to exercise the QROPS option and take your retirement benefits directly from a UK scheme?

If you are not entitled to the ‘new or returning resident’s tax exemption’ in New Zealand, (or the exemption period has expired) any payments made from a UK scheme would be taxed at a New Zealand resident’s highest marginal rate.

The basic tax rates in New Zealand (for tax year 2009/10) are banded as follows:

0 – NZ$14,000 @ 12.5%
NZ$14,001 – NZ$48,000 @ 21%
NZ$48,001 – NZ$70,000 @ 33%
NZ$70,000 and over @ 38%

If you are considering a move to New Zealand and you are thinking about taking retirement benefits directly from your UK scheme, you should speak to Global QROPS Ltd first. If you take your benefits in the form of an annuity or final salary pension, you can not transfer your benefits to a New Zealand QROPS and you would have lost the option to receive your pension benefits tax free.

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QROPS advice – a UK Pension Transfer to Australia and the Tax Rates

Tuesday, December 22nd, 2009

When migrating from the UK to Australia many individuals, that have accrued UK pension funds, take advice on a UK pension transfer to Australia – to transfer into an Australian QROPS (Qualifying Recognized Overseas Pension Scheme).

The benefits of a transfer to an Australian QROPS, from a UK scheme, is that at age 60 all payments from the Australian QROPS scheme in respect of the transfer, made to the member, are paid fax free.

If you migrate to Australia and do not transfer your pension to an Australian QROPS, then your private or company pension benefits would be paid to you directly from the UK scheme at retirement. Any permanent resident of Australia would be taxed at their highest marginal rate on this income (whether the income is received by them in Australia or not).

These rates, for tax year 2009/2010, are banded as follows:

A$1 to A$6,000               NIL
A$6,001 to A$35,000      15%
A$35,001 to A$80,000    30%
A$80,001 to A$180,000  38%
A$180,000 and over        45%

(The above rates do not include the Medicare Levy of 1.5%)

The tax year in Australia runs from 1 July to 30th June and the above rates would be subject to change on 30th June 2010.

Permanent residents of Australia with UK pension benefits, that are coming up to retirement, should consider a UK pension transfer to Australia – if they have not done so already – as a way of reducing the tax that they have to pay on their income in retirement.

For more information on Australian QROPS, speak to an adviser at Global QROPS Ltd.

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Transfers to QROPS and the Pension Special Allowance Rules

Saturday, December 19th, 2009

Many of Global QROPS Ltd’s clients, that fall into the high earner category, look to maximize the funding in the their UK pension before they migrate and potentially transfer those funds to a QROPS (Qualifying Recognized Overseas Pension Scheme).

Before a change in the rules, introduced in the Finance Act 2009, a high earner could contribute up to their earnings into a UK pension scheme, subject to the annual allowance (£245,000 in tax year 2009/10), and receive full tax relief on the contributions. However, a temporary measure introduced by the Finance Act 2009 placed a restriction on the amount that could be contributed.

What changes do Global QROPS Ltd’s clients, that are high earners, need to be aware of?

The temporary measure (mentioned above) is the ‘pension special annual allowance’ and is a tax allowance that restricts the tax breaks on UK pension contributions for high income individuals with relevant income of £150,000 a year and over. This temporary measure commenced on 22nd April 20009 and is expected to be in place until 5th April 2011 – at which point the Government intends to finalize the rules.

The basic allowance is set at £20,000 (although an individual may qualify for an enhanced allowance of up to £30,000). Should a high income individual contribute in excess of the pension special allowance, then a tax charge on the individual would be generated.

High earning individuals, looking to top-up their UK pensions before transferring to a QROPS, should be aware of the potential restrictions.

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Deferring UK State Pension – Extra Pension or Lump Sum?

Wednesday, December 16th, 2009

Global QROPS Ltd’s clients, that are due to retire, have the option of deferring their UK State Pension benefit entitlements. UK State Pension deferral is an important option for those clients who are still receiving employment income and also for those migrating clients that are moving to a jurisdiction where indexation is not available to their UK State Pension in payment.
If an individual reaches UK State pension age and decides to defer taking their UK State Pension, what benefits can they eventually receive?
The first option is to receive an extra State Pension in addition to your weekly State Pension. This would be payable for life. By selecting the income option, an individual can receive an additional 1% of their weekly State Pension entitlement for every 5 weeks that the State Pension is deferred. This is the equivalent to a 10.4% increase for every year deferred.
The second option, that Global QROPS Ltd would like to speak to their retiring clients about, is the one-off lump sum UK State Pension payment. In order to have this as an option you would have to defer taking the UK State Pension benefits for at least one year.
The one-off lump sum payment, that an individual can receive, is calculated using the amount of State Pension that the claimant could have receive, within the deferral period plus interest – which is at least 2% above the bank of England base rate. The regular State Pension income is then commenced.
Global QROPS Ltd are available to speak to migrating clients, who are approaching retirement, regarding their options.

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Global QROPS Ltd warn Temporary Visa holders looking at a UK Pension Transfer to Australia

Sunday, December 13th, 2009

It is more important than ever that a UK resident, moving across Australia on certain types of temporary visa, takes unbiased pre-migration advice from Anglo-Australian financial advice specialists. If you have been granted a temporary visa and you are considering a UK pension transfer to Australia, you will need to know all of the facts.

Since the Australian Tax Office’s (ATO’s) consultation paper in May 2008, temporary residents who have funds in their Australian Superannuation schemes, face a dilemma should they leave Australia and return home. In these circumstances, any Australian superannuation funds will be paid to the Australian Government.

The reasoning for this drastic measure is the amount money sitting, unclaimed, in the Australian Superannuation system, over the years – mainly as a result temporary and working resident visa holder returning home.

A former-temporary visa holder, once they have permanently left Australia, can claim their superannuation by applying for a ‘departing Australian superannuation payment’ as an alternative but they are taxed on this payment by the ATO.

For temporary residents that completed a UK pension transfer to Australia, a ‘departing Australian Superannuation payment’ would incur tax from Australia and could have implications with the UK QROPS legislation incurring an unauthorized payments charge.

Global QROPS Ltd can advise people, before they leave the UK for Australia, on the best course of action for their UK pension. There are many cases where a UK pension transfer to Australia is not a suitable option.

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What is the QROPS Reporting Period?

Wednesday, December 9th, 2009

Any client that has completed a UK pension to overseas pension transfer would first have to have ensured that the receiving scheme was approved by the UK’s HMRC (Her Majesty’s Revenue and Customs) as a QROPS – which is a Qualifying Recognized Overseas Pension Scheme.
Beyond the actual transfer, the receiving QROPS scheme has a continued responsibility to behave as a UK scheme – when it comes to the payment of pension benefits – for the Reporting Period.
During this period the QROPS provider has an obligation to report to HMRC any income, annuity, lump sum or death benefits payments to the member (or member’s dependents) in respect of the fund. But for how long, after the UK pension transfer to the QROPS has been made, does the scheme have an obligation to report payments?
A QROPS provider has to report any payment as long as the QROPS member:
• is resident in the UK when the payment is made (or treated as made), or
• although not resident in the UK at that time, has been resident in the UK earlier in the tax year in which the payment is made (or treated as made) or in any of the five tax years immediately preceding that tax year.
In short, the Reporting Period is 5 complete tax years of the member’s overseas residency. A return to the UK, in that period, could lead to the ‘5 year clock’ starting again and the QROPS scheme continuing to distribute and report any payments, as per HMRC legislation.

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QROPS Advice and the Changes to the UK Normal Pension Age

Sunday, December 6th, 2009

When looking at a UK pension transfer to an overseas pension scheme, approved as a QROPS (Qualifying Recognized Overseas Pensions Schemes), specialist QROPS advice would be needed because of the issues involved.
 
One important QROPS advice consideration is the UK rule changes as to what age an individual can access their benefits. From 6th April 2010, the minimum age at which benefits can be paid to a member is 55. This is known as the Normal Pension Age.
Up until 6th April 2010, the UK legislation permits a normal minimum pension age of 50. This is important point to bear in mind for those born between 6th April 1955 and 5th April 1960, as this leaves a limited period of time to bring benefits into payment before 55. If benefits have not been taken by 6th April 2010, no new benefits can be taken until age 55 – virtually a five year delay for those born just before or around the beginning of April 1960.
For people who have transferred or are looking to transfer to QROPS, who are within the 5 year reporting period, the age that they can access their QROPS benefits is the same as the Normal Pension Age of the UK pension schemes.
The UK Normal Pension Age is an important point for both the QROPS client and the receiving QROPS scheme to understand as the early payment of benefits, to a pension member, could lead to an unauthorized payments charge.

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Why has my UK Employer refused to complete a pension transfer to Australia?

Saturday, December 5th, 2009

For the thousands of people that migrate to Australia each year, whether a pension transfer to Australia is possible or not, may not be the foremost topic on their mind.

For those that do think of the possibility of a pension transfer to Australia, the first enquiry may be put to their employer (or the scheme administrators running their company pension scheme) or, for UK expat pension members, their former employer. In some cases, an employer (or former employer) may inform their member that a pension transfer to Australia is not possible, but are they correct to say this?

There may indeed be legitimate reasons as to why a pension transfer to Australia or to another UK scheme or even to a QROPS (Qualifying Recognized Overseas Pension Scheme) in another jurisdiction is not possible. One problem may be if an individual is within 1 year of their normal retirement from the scheme. In those circumstances an individual no long has a UK statutory right to a transfer – although the scheme trustees/administrators do have discretionary powers to grant a transfer.

Another reason may be down to the Australian scheme itself. Does the scheme feature on the list of approved QROPS that appears on the HMRC (Her Majesty’s Revenue and Customs) website? A UK scheme administrator may not see a scheme listed and refuse to transfer on this basis. Remember, however, the HMRC QROPS list is not a definitive list and should not be used as an ultimate guideline. In which case, has the scheme administrator for your UK pension asked for the receiving schemes QROPS certificate?

An individual looking at a pension transfer to Australia should speak to a specialist adviser in this field, pre migration if possible, in order to establish whether a pension transfer to Australia is possible or not.

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