In a submission to Treasury, Chartered Accountants Australia and New Zealand said UK pension schemes can only transfer benefits to a Qualifying Recognised Overseas Pension (QROP) scheme where the super fund meets a range of criteria.
One of the requirements is that benefits cannot be paid from such schemes before retirement other than in limited circumstances, which do not include compassionate grounds or financial hardship grounds as defined in the SIS Regulations before a member reaches age 55.
“This relatively recent UK regulatory requirement has seen a dramatic decrease in the funds flowing from UK pension schemes into Australian-based super funds,” the submission explained.
“This change is negatively impacting permanently returning ex-pat Australians and permanently emigrating UK citizens because an inability to transfer their UK pension monies means that they are forced to leave money in the another jurisdiction which increases costs and creates regulatory uncertainty.”
The submission stated that the SIS Regulations should be amended to permit super funds to irrevocably elect to exclude their fund, or a defined portion of a fund, from early release rules.
“This may enable them to receive UK pension scheme benefit transfers,” the submission said.
The submission also noted that the regulatory structure of some of the rules around the early release of superannuation create complexity for consumers seeking to use financial hardship or compassionate grounds.
“In this area, as with many areas of superannuation, there are the regulatory rules and there is also a fund’s trust deed and other governing rules. Both of these sets of rules can be changed quickly and without much general community or specific member knowledge,” the submission explained.
“The confusion is that the regulatory rules can state one rule but the fund’s trust deed can state a more restrictive rule.”
When a super fund is found to have rules that are more restrictive than the super laws, the submission said, then the only way a member might be able to gain access to their benefit under the rules in question is to transfer their balance to another super fund, which involves time delays and potential costs.
“We are not in favour of the government enforcing more detailed early access provisions into fund governing rules via regulation. However, we believe an alternative solution may be for funds to publish their requirements clearly, including any inconsistencies with the SIS Regulations and for consolidated information to be made available on the APRA and/or ASIC websites,” the submission stated.