The Great Australian QROPS Disaster

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Written By Hossein Soltani

Australian Qualifying Recognised Overseas Pension Scheme (QROPS) as the pension world knew them are no more – and won’t be coming back in huge numbers any time soon.

The death knell tolled for Australia QROPS on April 6, when providers and HM Revenue & Customs (HMRC) realised that a basic flaw in them failed UK pension rules.

Basically, Australia QROPS allow retirement savers under 55 years old to draw payments, which is contrary to Britain’s new flexible access pension laws that started on that date.

The QROPS industry has drawn a line under the disaster that has seen 1,650 Australia QROPS delisted and thousands of savers left in financial turmoil.

The way ahead is not clear.

Market in turmoil

Some QROPS provider see the glimmer of an opportunity in setting up new pension schemes that comply with HMRC rules and Australian financial regulations.

A few Australian providers are reviewing their status to see if they can still offer QROPS

Meanwhile scammers are moving in with nonsense solutions that offer more problems for anyone transferring pension relieved contributions from the UK on to another scheme.

Whatever the solution, two facts are clear:

  • Only regulated and authorised Australian pension advisers can discuss QROPS solutions with consumers
  • Any transfers out of delisted QROPS can only go to another QROPS if the scheme is listed by HMRC

Who is affected?

Australia QROPS were available to British expats and other individuals living in Australia who had accrued UK pension rights at some time in the past, such as Australians who had worked in the UK and contributed to a workplace or private pension.

Potentially, this could add up to thousands of retirement savers as Australia is one of the most popular destinations for British expats.

Anyone who has transferred funds from a British pension to an Australian QROPS since April 6 may face hefty tax penalties from HMRC, as the schemes became non-compliant on that date.

Penalties start at a 55% surcharge on the transfer of cash that had received pension contribution relief in the UK.

Sadly, no one-size fits all solution is available.

Australian residents seeking to transfer UK pensions to a new QROPS can take advice about pensions based in financial centres such as Gibraltar, Malta and the Isle of Man which allow retirement savers to live in another country without affecting their pension rights.