Australia QROPS Transfer Rules Changing

By Retirement

Proposed ultra-low savings caps have been lifted for British expats switching their retirement savings to an Australian Qualifying Recognised Overseas Pension Scheme (QROPS).

The Australian government had considered limiting lifetime pension savings to Au$500,000 (£300,459).

That plan has now been scrapped. Instead, the lifetime cap is set at Au$1.6 million (£961,412) but with one big catch for retirement savers to watch for – the new limit does not apply to lifetime pension contributions but fund size.

That means if investment performance races ahead and pushes fund values up, the retirement saver cannot add any more cash to the pot.

As part of rejigging pension rules, Scott Morrison, the Australian Treasurer – the equivalent to the UK Chancellor of the Exchequer – lowered the yearly net contribution cap to Au$100,000 (£60,107) following protests from within his own political party.

Cash limits on pension transfers

The new rules take effect from July 2017 and severely impact on the amount of cash British expats can switch to Australia QROPS.

Under the Australian bring forward rules, an expat has three-years of unused annual net contributions to transfer in year one – which is $Au 300,000 (£180,321).

This reduces to Au$100,000 in subsequent years, so switching a £500,000 UK fund to an Australia QROPS may take up to seven years.

Expats may want to look to other QROPS options for transfers – including third party QROPS that sit in one country while an expat lives somewhere else.

These QROPS are offered in financial centres such as Gibraltar, the Isle of Man and Malta.

They also pay benefits gross in Australian dollars direct to an expat’s local bank account.

Australia QROPS

Pension providers in Australia now offer more than 300 QROPS pensions to expats and Australians who have UK pension rights.

The country is the largest QROPS destination – with around one in four of all of the offshore pensions based there.

The first pooled super fund for expats opens this month after a 14-month lull, expanding investment opportunities for QROPS pensions.

The Australian Expatriate Superannuation Fund is targeting Au$100 million (£60 million) of UK expat pension fund transfers by October 2017.

“We are the first Australian fund to be placed on the official QROPS list, which we think is significant” said a spokesman.

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