Welcoming HMRC’s crackdown on QROPS

01 Jul

I am wholeheartedly backing the move made by HMRC today to remove Australian superannuation funds from its official recognised list of Qualifying Recognised Overseas Pension Schemes (QROPS).

Despite the fact that Australian superannuation funds are stringently regulated, since the ‘pensions age test’ came into effect on 6 April this year, they no longer fulfil the requirements in order to be considered a QROPS, as they allow the over-55s early pension drawdown.
Consequently, all monies transferred into the funds after 17th June – the date HMRC sent out a letter to QROPS operators asking them to confirm that their scheme meets the new requirements – could now risk a penalty of up to 55 per cent.

This led to concern from the Law Council of Australia, whose secretary general last week applied to HMRC for the funds to be exempt from the pensions age test stipulations, stating that “Australian superannuation funds are highly regulated and closely supervised by Commonwealth regulators, including the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Australian Taxation Office.”

I champion this latest decision by HMRC, which provides further restrictions on the allowance of funds to be transferred for individuals to then withdraw their pension pot in a lump sum, because this goes against everything a QROPS is supposed to be and do – provide a retirement income for those living overseas.

Today’s move – and the fact that HMRC is putting more and more of its considerable resources into this sector – reinforces that QROPS are now a fully mainstream part of retirement planning options, and shows how the overseas pension transfer market has truly come of age since QROPS were launched nine years ago.

Clients with QROPS are now more protected than ever with these rule changes, making them an even more appealing option for expatriates.  I forecast that demand for QROPS is going to increase yet further!

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