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UK govt to examine pension transfer
British ex-pats who have received pension transfers into Australian superannuation funds in the last nine years may have them examined with concerns expressed about the use of the funds once in Australia.
The move follows recent changes to UK pensions transfer laws which restrict movement of pensions to funds outside the UK that allow early release for financial hardship. The new UK laws restrict movement to funds that only offer early release in the event of financial hardship and impose a 55 per cent tax on transfers to non-complying funds.
Under conditions of pension transfers the UK tax authority — HMRC — requires a 10 year reporting window on transfers, with the 10 year window first being applied from 2006.
Those conditions also state that pensions transfers to purchase residential property or used for non-arm's length lending within a self-managed superannuation fund or used to purchase life insurance within any type of superannuation fund, were not allowed and may also be liable to pay the 55 per cent tax.
Montfort International, managing director, Geraint Davies said the examination by HMRC of recent pension transfers had discovered these uses of transferred funds stemming back to 2006, with HMRC able to claim old age pensions, property and other assets still held in the UK to pay the tax.
He stated that in discussions with HMRC the tax authority indicated it would examine transfers during the reporting period after becoming concerned over the recent transfer arrangements.
Davies said the tax, levied at 55 per cent — the standard amount for an inappropriate transfer or use of funds under UK law — may be applied to people to people who have transferred to any form of superannuation fund, including self-managed superannuation, which made up the majority of the 1600 funds which are currently banned from receiving any further pension transfers.
AUTHOR
Jason Spits
Jason has been writing on financial services since 1999 and has worked for on a number of trade media titles in both a full time and freelance capacity. He joined Money Management and Super Review in 2013 in the role of Senior Journalist.
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