Australia was one of the first offshore financial centres to introduce Qualifying Recognised Overseas Pension Schemes (QROPS) in 2006.
QROPS were established in April 2006 as part of a European directive allowing European Union retirement savers to have portable retirement savings.
They soon became popular with expats as they offered features and benefits not generally available with an onshore UK pension.
Many financial centres offered lower tax rates, improved investment opportunities and other benefits attractive to investors.
In November 2006, according to the HM Revenue & Customs (HMRC) QROPS List, Australia had 63 pensions for expats.
Trusted and reliable
Over the years, this number grew rapidly to make Australia the leading global QROPS provider for expats moving to a new life Down Under.
Australia also had the dual advantages of being home to thousands of Australians and other foreign workers who had built up pension rights in the UK and a favourite retirement destination for British expats.
In February 2007, Australia QROPS flew past the 100 mark and numbered 1000 in November 2012.
By June 2015, Australia had 1653 QROPS making up 44% of the market by number of schemes.
Despite concerns in other leading market places about tax avoidance, Australia was considered a reputable and trustworthy financial centre managed by a tough regulator.
Disaster strikes
Then, for some inexplicable reason, disaster struck in June 2015.
HMRC delisted 1652 Australia QROPS – leaving just one local government scheme open.
The reason stemmed from the UK overhaul of pension rules in April 2015. A new regulation called the pension age test in Britain demanded that registered pensions could only make payments to retirement savers aged over 55 years old.
A review of Australia QROPS by HMRC revealed Australia QROPS were mostly superannuation schemes that allowed payments in some circumstances to savers aged below 55.
This led to the delisting of the Australian pensions.
Retirement savers transferring into an Australia QROPS before April 6, 2015 do not have any financial problems – UK regulations at that time mean the transfers were properly authorised.
However, those making transfers between April 6 and June 17 shifted their cash into an authorised scheme because of the rule change.
This leaves them open to a tax penalty of up to 55% of the transfer value of UK tax relieved pension contributions.