Posts Tagged ‘Australian QROPS’

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Australian Investor Retirement Visa – tax free retirement

Thursday, August 12th, 2010

Retirees moving to Australia on an Investor Retirement Visa, subclass 405 are able to live tax free in Australia by utilising Australia’s tax exemption on foreign sourced income.

The Investor Retirement Visa is designed for individuals aged 55 and over with net assets in excess of AUD$1,000,000. The visa allows you to live in Australia for four years and is renewable every four years thereafter, provided that you continue to meet the eligibility criteria.

With its tax friendly regime for temporary residents, together with all year round sunshine, Australia is a popular retirement destination for British expats. Retiring to Australia also allows you to transfer your UK Pension fund to an Australian Superannuation fund which is registered as a QROPS. Australian QROPS allow you to access your pension fund as a 100% tax free lump sum, once you are outside of the QROPS reporting period.

Global QROPS specialise in advising migrants on how to structure their finances in order to meet the financial requirements for the visa, whilst also taking advantage of the foreign sourced income exemption.

To find out more about the Investor Retirement Visa requirements, or Australian QROPS, please contact the Global QROPS team.

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Australian Foreign Investment Fund Rules Abolished

Monday, August 9th, 2010

The Australian government has abolished its punitive Foreign Investment Fund (FIF) regime that taxed permanent residents of Australia on the annual growth of certain foreign pension funds (including QROPS). Under the old rules, the annual fund growth was assessable to tax at an individual marginal rate to a maximum of 46.5%.

The Australian treasury originally announced plans to abolish the FIF regime back in May 2009. However, it is only recently that the draft replacement legislation has been published.

It is proposed that the FIF rules will be replaced with an ‘anti-roll-up’ regime, which is targeted at a very narrow type of foreign accumulation fund.

It appears from the draft legislation, that it will be possible for Australian residents to hold funds in certain overseas pension funds, without paying tax on the annual growth.

Income drawn from a foreign pension fund will generally be assessable to Australian tax, whilst income from an Australian Superannuation fund is tax free. Therefore individuals should still look at the possibility of transferring their funds to an Australian Superannuation Plan. Advice on whether a pension transfer to Australia is in client’s best interests may not be as clear cut as under the previous regime and factors such as the exchange rate, visa status and the individuals long term intentions need to be taken into consideration.

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Pension Transfer to Australia – What will happen with my State Pension?

Sunday, March 21st, 2010

Global QROPS Ltd offer expert advice on whether our clients should affect a pension transfer to Australia with their UK or company sponsored schemes. As part of our advice service, we also look at individual’s options for the UK State Pension.

An important decision has been reached, by the European Court of Human Rights (ECHR) on 16th March 2010, as to the level of State Pensions paid to UK migrants living in Australia.

For migrants receiving their UK State Pension entitlement in Australia, there is no increase on the income paid to them. This stacks up unfavourably compared to someone, who has paid exactly the same UK National Insurance contributions, who has chosen to stay in the UK or migrated to another country, such as the USA or an European Economic Area (EEA) state.

Many appeals to the EHCR have been made, not just by UK state pensioners in Australia, but by those in Canada, New Zealand and South Africa too, citing that this is discriminatory.

Unfortunately for those appealing, the EHCR ruled (on 16th March 2010) that the UK Government were not discriminating as migrants had themselves chosen to live outside of the UK in countries or states without a reciprocal state pension agreement with the UK. Judges decided that the link with National insurance contributions paid was not an exclusive link to the level of UK state pension paid and that the ECHR had no jurisdiction to dictate on how the UK’s public funds were distributed.

Advisers at Global QROPS Ltd are more than happy to speak to clients regarding UK State Pensions as well as discussing issues regarding a private pension transfer to Australia.

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Global QROPS Ltd at the Down Under Live Exhibition

Monday, January 25th, 2010

Global QROPS Ltd, UK independent financial advisers that specialize in providing, financial advice for people migrating to Australia and New Zealand, will be exhibiting at the Down Under Live exhibition on Saturday 30th January and Sunday 31st January in London.
The exhibition is to be held at the Business Design Centre, London. For details of the times and location of the show, please check the attached link:
http://www.downunderlive.co.uk/london_directions.php
Global QROPS Ltd will be available to speak to potential migrants who are looking at all financial concerns relating to their move including major topics such as a pension transfer to Australia (or New Zealand), retaining UK property, UK inheritance tax and investments.
Potential migrants that have not considered the financial aspects of migration should take this opportunity to speak to Global QROPS Ltd to see if their service would be of some benefit to them.
People that may have already enquired or researched aspects such as a pension transfer to Australia or New Zealand and other financial implications in migrating Down Under should also speak to the experts to ensure they are not missing out on any details or tax breaks that their move to Australia or New Zealand could offer.
The Down Under Live exhibition is an excellent opportunity for a potential migrant to speak face to face with firms and companies that assist in a variety of aspects in the migration process.
Global QROPS Ltd looks forward to meeting you there.

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How does the QROPS Reporting Period Affect a UK Pension Transfer to Australia?

Saturday, January 23rd, 2010

Anyone approaching retirement and migrating to Australia, who is looking at a UK pension transfer to Australia, would need to consider how flexible the Australian QROPS (Qualifying Recognized Overseas Pension Scheme) is permitted to be during the QROPS reporting period.

Members of a UK pension scheme are allowed to transfer their benefits to an overseas pension scheme at anytime – providing the overseas scheme has been approved by the UK’s HMRC (Her Majesty’s Revenue and Customs) as a QROPS. However, a member of a scheme can not take advantage of the possible flexible pension benefits that the QROPS provides until after Reporting Period.

The Reporting Period is the time period in which the QROPS has to report to HMRC any payments (death benefits, lump sums or income) to the member (or member’s beneficiaries).

How Long is the QROPS Reporting Period?

The QROPS reporting period is 5 complete tax years of the pension member’s overseas residency.

For example, if an individual migrated to Australia on 1st July 2006, then the reporting period would last for the rest of that UK tax year (ending 5th April 2007) and for the 5 following completed UK tax years. Therefore, in this example, the reporting period would finish on 5th April 2012.

This may affect an individual’s retirement planning when considering a pension transfer to Australia (or any other overseas scheme). An individual pension member needs to be aware that their QROPS scheme will follow the same rules as a UK scheme for the reporting period and that they would not get the full flexible benefits from the Australian scheme before then.

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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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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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Transferring a UK Final Salary Scheme to an Australian QROPS

Tuesday, December 1st, 2009

If you are migrating to Australia and are a member of a UK final salary (defined benefit) scheme, clients need to decide whether they wish to transfer these UK benefits to an Australian QROPS (Qualifying Recognized Overseas Pension Scheme).

Australian Superannuation schemes (approved as QROPS) do not operate in the same manor as UK final salary schemes therefore what considerations need to be taken into account?

Final Salary schemes in the UK work on the principle that a member receives a pension (and tax free cash) based on their years of service and their final earnings. This a key difference to Australian QROPS where and individual member’s retirement benefits are based on the size of the fund accrued.

With this in mind, how is the UK final salary scheme transfer value calculated?
The current rules set out for calculating pension transfer values, after 30th September 2008, for UK Final Salary schemes, is that the basic ‘cash equivalent value’ should be at least the best estimate of the money required to be invested in the scheme to reproduce the relevant member’s benefits.
All UK final salary schemes will employ a scheme actuary to calculate the transfer value and the actuary will take into account several factors relating to the individual’s benefits as well as the employer funding levels of the scheme.
Global QROPS Ltd will complete an analysis for all clients looking to transfer out of a UK final salary scheme to ascertain whether the transfer value, a scheme actuary has calculated, makes a pension transfer to Australia a viable option.

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Will a Pension Transfer to Australia Improve my Death Benefits?

Sunday, November 29th, 2009

As well as considering what investment, income and tax free cash that an Australian Superannuation provides, when making the decision to complete a UK pension transfer to Australia, a UK pension member would also have one eye on the death benefits.

With that in mind, will a pension transfer to Australia (to an Australian QROPS) increase an individual’s death benefits or would a UK pension member be better off leaving funds in the UK (if the death benefit was the primary concern)?

The first point to ascertain is what are the death benefits available from a UK scheme?

The death benefits from a UK scheme depend on several factors, for example, the type of scheme. If an individual is a member of a UK employer sponsored scheme, the death benefits may be very different from that of a member of a UK personal pension. Typically, the death benefit for someone who is a current member of an employer’s scheme is a lump sum based on multiple of their salary (sometimes written under a separate cover) whereas a member of a UK personal pension would receive a return of fund.

If a UK pension member no longer works for the employer that the employer sponsored scheme relates to, the death benefits available may be paid in the form spouses/dependents pensions as opposed to a lump sum. If an individual leaves an employer and has a personal pension, then a return of fund would still apply on death.

Where an individual has already taken benefits from a scheme, the death benefits start to get a bit more restrictive. From an employer’s pension scheme, that is a final salary scheme, it is mainly widow’s and dependent’s pensions that are paid. From a personal pension in drawdown, a lump sum can be paid on death – less 35% tax. If an annuity is purchased, with UK pension funds, death benefits depend on the terms of the annuity at outset ie were dependents pensions or a guaranteed period included?

Australian superannuation schemes usually pay out lump sums on death (based on the value of balance of the fund at the time) regardless of whether a pension is payment or not.

If a UK migrant to Australia, is concerned about death benefits and looking at Australian QROPS (Qualifying Recognized Overseas Pension Schemes) as a scheme to transfer their UK pension funds to, then the individual should take pre-migration advice from a specialist adviser that understands BOTH the UK and the Australian systems. Global QROPS Ltd has the experience to provide this advice.

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A Defined Benefit (Final Salary) pension transfer to Australia – What if I’m contracted-out?

Friday, October 23rd, 2009

Many members of UK defined benefit (final salary) schemes are contracted out. How does this change a migrating member’s thinking when looking at a pension transfer to Australia?
Not everyone who is in a contracted out defined benefit scheme knows exactly what this means or the nature of the benefit. For those considering a UK pension transfer to Australia they would need pre-migration advice to be aware of the benefit they are potentially giving up from their existing UK scheme.
The final salary scheme benefit referred to as ‘contracting- out’ is the element of the pension that the employer has funded by redirecting the employees national insurance contributions, that were to provide them with the State Earnings Related Pension Scheme (SERPS), to the employer’s scheme.
In a defined benefit scheme, the pre 6th April 1997 benefits are known as GMP (Guaranteed Minimum Pension) and the post 6th April 1997 benefits are known as Section 9(2B) Rights.
Although the precise calculation of these pension rights is complicated, they could form a significant part of a member’s final salary income. The guaranteed nature of a defined benefit pension is lost when transferring to an Australian QROPS and, with it, the contracted out element.
An individual with a UK defined benefit scheme, on a permanent visa to Australia, may consider the tax free benefit gained from a transfer to an Australian QROPS appealing but they would need to weigh this against the benefit of guaranteed income for life from their UK Contracted Out Defined Benefit scheme.

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