How to know if you are eligible for QROPS SMSF?
A Qualifying Recognised Overseas Pension Scheme (QROPS) is an overseas pension scheme that certain UK pension members can transfer their UK pensions into. You can use a QROPS to transfer your pension to a limited number of overseas locations so this is an option that you need to take advice on, if you are thinking about emigration. Being a qualified scheme means it meets the specific and tight requirements set by Her Majesty’s Revenue and Customs (HMRC), and it is recognised as being eligible to receive transfers from registered UK pension funds.
The UK government gives notice of schemes that have declared themselves as Recognised Overseas Pension Schemes (ROPS). Government information is also available to update people on QROPS requirements. For example, they have published changes in relation to these requirements that came into effect from 6 April 2017.
An SMSF is a Self-Managed Super Fund - which is a type of superannuation fund available in Australia. Money transferred into a super fund is handled by highly qualified, skilled and experienced trustees and administrators. With SMSF schemes, the members themselves are trustees so you can make the investment decisions yourself, with the help of your adviser. You are in the driving seat.
Why would someone want a QROPS SMSF?
QROPS SMSFs are attractive for a number of reasons. Firstly, by transferring your pension funds into a QROPS SMSF, you are in charge of how the fund is handled. These schemes can offer more investment choice to the individual. The added flexibility that QROPS SMSFs offer, may enable you to minimise your tax burden on your pension funds.
While transferring to a QROPS SMSF often makes good sense, not everyone is eligible.
Are you at least 55 years old?
You have to be at least 55 years of age to transfer your pension funds to an Australian scheme – such as a QROPS SMSF. If you are under the age of 55, there are other avenues that you can consider such as a self-invested personal pension (SIPP). Again, it is recommended that you first take advice before transferring your funds.
Do you have a large enough pot?
Transferring to a QROPS SMSF will incur costs. For the transfer to be financially worthwhile, you need to have accumulated a large enough pot
bdhSterling can give expert advice on whether you will benefit from a transfer.
Have you purchased an annuity on your pension fund?
You will not be able to transfer your pension funds to a QROPS of any kind if you have already purchased an annuity. This is why it is so important to manage your funds carefully before considering QROPS SMSF.
Have you already started receiving payments from a final salary scheme?
Final salary schemes are eligible for transfer into QROPS SMSFs provided the pension has not started. If any payments have been received from the scheme this will be viewed in the same way as purchasing an annuity and your pension will not be eligible for transfer into a QROPS.
Is your pot too large?
The maximum lifetime limit of your QROPS SMSF is $1.6 million Australian dollars. Furthermore, there is a limit on Non-Concessional Contributions (NCCs) of $100,000 Australian dollars per year.
Is your current pension a Public Sector Pension Scheme?
Some UK schemes are not eligible for transfer into a QROPS SMSF. These include schemes run by the NHS, teachers, the civil service and the armed forces for example.
Do you want to transfer a state pension?
Funds held in a UK state pension cannot be transferred into a QROPS SMSF. Schemes that are eligible are private sector final salary and company pension schemes, or any personal pension that you may have (provided that you have not purchased an annuity with the funds).
What about the scheme that you want to transfer into?
Take note that it is your responsibility to ensure that any scheme you transfer your UK pension into must be a genuine QROPS. That is, it has to be qualified and recognised by HMRC. If you transfer your pension into a SMSF that is not QROPS, it will be seen as an unauthorised payment and will be heavily taxed.
Put your faith in the experts.
Transferring a UK pension fund into a QROPS SMSF is a complex procedure. In order to ensure that such a transfer is right for you and, if so, to identify the best scheme for you, you will need expert advice.
Our experts at bdhSterling will help you understand the process of transferring your pension into a QROPS SMSF and help you make the right decisions where your pension fund is concerned.
Contact us today to discuss your next steps.