Aaron Dunn, CEO of Smarter SMSF, said with this change SMSF deeds will be more closely scrutinised and require updates that reflect the new age threshold. He said advisers need to identify affected clients, review deed wording, and ensure crystallisation requirements are understood and documented particularly for the transitional cohort who risk being locked out of transfers if their UK pension is not realised before the rule change.
“One of the things we have been working through since April has been the fact that we are seeing an age change from 55 to 57 years to that qualifying age for someone to be able to become a member of a self-managed fund and therefore qualify to transfer UK pension monies across to Australia,” Dunn said.
Tim Miller, head of technical and education for Smarter SMSF, said QROPS has a “long history” and one of the first requirements of being able to transfer money from a UK pension is that from a receiving fund point of view it has to register with the UK tax office.
“You have to meet certain conditions, and if you don’t and try to take money out of the UK and it into Australia, there are ridiculously harsh tax penalties in regards to what they would call generally an unauthorised withdrawal, unauthorised benefits,” Miller said.
“It’s still a bit old school from a registration point and takes time to occur, but the reality is a number of years ago they changed the rules to restrict the capacity to roll money over to age 55 and that effectively wiped every fund in Australia off the register, because we have our additional conditions of release.
“Whilst preservation age for Australia at that point was 55, there wasn’t too much of an issue. We had all these other conditions of release – disability, compassionate grounds, financial hardship, other elements that didn’t satisfy the UK pension rules, and it ultimately put a kibosh on any Australian fund being registered.
“SMSFs were quick to adapt to that, and created rules which restricted fund membership age 55 to ensure that those funds could then subsequently be registered and receive monies in from the UK to ensure that they maintain the tax concessions.”
Dunn added that Smarter SMSF is one of the firms within Australia that did adapt to create a specific QROPS deed with specific changes to several key rules.
“Rule three looks at specifically restricting membership to those who are 55 years of age or over. What has transpired is that HM Revenue and Customs (HMRC) has said it will spend more time exploring the particulars of the deed to ensure that the prescriptive nature of age 55 has been updated to 57 in accordance with UK law,” he said.
“What becomes interesting is that we will have situations whereby it can be quite simple, in so far that you know someone is already 57 to easily identify those, and therefore we’re not going to have any problems. However, we also have a cohort in the middle who need to ensure they don’t get caught out by the change.”
Dunn continued that the information from the UK is that with this transitional cohort, transfers ultimately should only be accepted where the UK pension has already been crystallized prior to the transfer.
“Ultimately this is about removing the SIS hardship access risk as the UK event around that has already occurred compliantly,” he said. “It’s worth noting that whilst we have ages that are relevant for membership here, we still have preservation conditions that we’ve got to meet on the Australian side of the fence as well.”
He continued HMRC has indicated that as a result of the upcoming change it is now requesting that schemes submit an updated deed that is compliant with the new clauses in advance of these rules being implemented.
“There’s a few important lessons for those that have clients, or advise in this space, that you need to ensure the deed is referencing these key changes going forward. Digging a little bit deeper, from a Smarter SMSF point of view, what we have done in that regard is made some changes,” he said.
“We’ve put in amendments around the qualifying age, and we’ve also reflected changes around the trustee powers in rule 15 that the QROP status reflects the normal minimum pension age definition, subject to any protected pension age that is held by that transferring member and ultimately the powers of the trustee to authorise and accept payments.
“There is also a specific provision within rule 25 about accessing superannuation benefits and again ensuring that the trustee is not accessing or accepting the transfer of benefits from a registered UK pension scheme, unless those conditions have been satisfied.”
He said what advisers should be looking for is the removal of any “hard wiring” in the deed.
“If you’re seeing things like age 55 being referenced and you’re still active in wanting to move monies across, just note that you would need to go through an update process to ensure that they would be accepted going forward,” he said.
“Equally, if new funds are being set up to enact transfers, we’re going to see HMRC dig a little bit deeper and request copies of deeds to ensure that they comply with the amendments that are coming in from 6 April 2028.”
