Anyone approaching retirement and migrating to Australia, who is looking at a UK pension transfer to Australia, would need to consider how flexible the Australian QROPS (Qualifying Recognized Overseas Pension Scheme) is permitted to be during the QROPS reporting period.
Members of a UK pension scheme are allowed to transfer their benefits to an overseas pension scheme at anytime – providing the overseas scheme has been approved by the UK’s HMRC (Her Majesty’s Revenue and Customs) as a QROPS. However, a member of a scheme can not take advantage of the possible flexible pension benefits that the QROPS provides until after Reporting Period.
The Reporting Period is the time period in which the QROPS has to report to HMRC any payments (death benefits, lump sums or income) to the member (or member’s beneficiaries).
How Long is the QROPS Reporting Period?
The QROPS reporting period is 5 complete tax years of the pension member’s overseas residency.
For example, if an individual migrated to Australia on 1st July 2006, then the reporting period would last for the rest of that UK tax year (ending 5th April 2007) and for the 5 following completed UK tax years. Therefore, in this example, the reporting period would finish on 5th April 2012.
This may affect an individual’s retirement planning when considering a pension transfer to Australia (or any other overseas scheme). An individual pension member needs to be aware that their QROPS scheme will follow the same rules as a UK scheme for the reporting period and that they would not get the full flexible benefits from the Australian scheme before then.