LONDON: UK expats wanting to retire here may face hefty tax penalties if their Australian fund won’t match the UK’s stricter pension transfer rules by this week.
Under the British system, pension holders are not allowed to draw from their funds until they are 55 unless they have health problems. The UK authorities now want to introduce the system for their former residents who live in Australia.
Australian funds sometimes allow members to draw on pensions early in cases of financial hardship. But if they don’t follow the UK example and apply a pension age test, their expat members could be hit with a tax penalty of up to 55 per cent on any money they take out of their scheme before the qualifying age.
It follows a law change in April this year in which the UK banned unfunded public-sector defined benefit schemes from being transferred into Australian accounts until they become payable at retirement age.
The British pension authority – HM Revenue & Customs – has written to Australian super funds registered under what’s known as the Qualifying Recognised Overseas Pension Scheme (QROPS), asking them to declare their acceptance of the new age test rules before June 17.
Australian super funds who don’t comply could lose their QROPS status, which means they won’t be able to oversee the transfer of UK pensions.
