How much do I need to transfer into QROPS SMSF?
Considering a QROPS SMSF?
If you are considering putting your money into a Qualifying Recognised Overseas Pension Scheme (QROPS) such as a Self-Managed Super Fund (SMSF), it is important to understand how much to transfer to gain the most benefit. This article examines what a QROPS SMSF is, what the benefits of such a scheme are, and how much you should be transferring.
What is an SMSF?
An SMSF or Self-Managed Super Fund is a type of “super fund” or superannuation fund that puts you in the driving seat. Super funds provide financial remuneration to their members in retirement. The funds themselves are handled by qualified, skilled and experienced administrators.
In the case of a SMSF, the trustees are the members themselves. This means that if you invest in an SMSF, you (along with expert guidance from your financial adviser) get to make all the decisions on how your money is invested.
What is a QROPS SMSF?
A QROPS SMSF is a Qualifying Recognised Overseas Pension Scheme (QROPS). That means the SMSF meets the specific and stringent requirements set by Her Majesty’s Revenue and Customs (HMRC) to qualify as a QROPS. As a QROPS fund it can receive transfers of UK pension benefits. In summary, a QROPS is an overseas pension that meets HMRC’s criteria as being eligible to receive transfers from registered UK pension funds.
Any pension can be transferred to a QROPS provided an annuity has not been purchased, the pension is not a Public Sector Pension Scheme or, if it is a company final salary pension scheme, the pension has not commenced.
What are the benefits of a QROPS SMSF?
One of the most obvious benefits to an SMSF is the control it gives to the members. As trustees, they are in charge of how the fund is handled. SMSFs offer a wide range of investment choices.
Transferring pension funds to a QROPS SMSF will bring a great deal of flexibility and this enables members to minimise taxation on the pension funds, when they retire. There are multiple reasons why people may benefit by transferring to a QROPS SMSF however, there are set up costs involved and these will affect the decision as to whether this type of transfer is the right option or not.
Setting up a QROPS SMSF
Given the considerations when setting up a QROPS SMSF, it is advisable to seek guidance from reputable experts.
If you are planning on emigrating to Australia, are over the age of 55 and have pension funds in the UK, then setting up a QROPS SMSF may be an option. bdhSterling make the process much smoother. They assist with every aspect of the SMSF including:
- Preparing all documentation for the new fund
- Identifying the Corporate Trustee (if required)
- Applying for your Australian Business Number (ABN) and Tax File Number (TFN)
- Organising all bank accounts (including GBP deposit account for direct transfers)
- Applying for QROPS status via HMRC
- Registering the fund with the Australian Tax Office (ATO)
- Submitting all ATO compliance relating to tax liabilities on the transfer
How much does it cost to set up a QROPS SMSF?
The setup costs are not insignificant and these will have a bearing on whether the transfer is worthwhile for you.
Regardless of the setup costs, the returns on a QROPS SMSF can be very attractive. What counts is that the advisors you use are transparent so you are furnished with the full facts. If the QROPS is managed correctly, charges should be comparable to your current pension but the range of investment options that can be greater than through a Self-Invested Personal Pension (SIPP).
Make it worth your while
At bdhSterling, we believe in giving the best advice possible, to ensure that you make a decision that is going to benefit you most. That means being completely transparent so that you are aware of the costs and benefits. We have built a reputation as a firm that can be depended on and trusted.
Given the fixed costs you will incur for your QROPS SMSF to be established and managed, the greater the value of your SMSF, the more you will benefit. In most cases, for this type of fund to be worthwhile transferring to, you would have to have comfortably in excess of £100,000 in your UK pension fund.
Is the QROPS SMSF option right for you?
We are here to help you make the decision that is right for you. If the QROPS SMSF option is perhaps not the best one for you, we can advise on alternative, cost effective solutions.
If you are moving to or resident in Australia, get in touch to discuss the transfer of your UK pension to a QROPS SMSF and we will help you to understand the full picture.