QROPS transfer options for Indian nationals living in Australia
In recent months, QROPS Adviser Group has received a large number of enquiries from Indian nationals who have previously worked in the UK, and have subsequently moved to Australia to work.
Many of these enquiries are from doctors who have worked in the NHS and have accumulated sizeable NHS pensions during their employment with the NHS, and want to know their options in relation to their NHS pension, and how to transfer out into a QROPS plan. One of the reasons for the increased level of enquiries is associated with the news that the government will shortly implement a ban on transfers of NHS pensions into QROPS schemes.
This article will try to offer some guidance for Indian nationals or NRI’s currently living in Australia who have built up an NHS pension or other UK pension assets, and want to know their options in relation to transferring their UK pensions into an overseas or India QROPS scheme.
Where is the best home for your NHS pension – UK, India or Australia?
Cross border pension advice can be incredibly complicated at the best of times, and especially so when you have accumulated pension assets in one country (a NHS pension in the UK, for example), are currently living and working in another country (Australia), but ultimately intend to retire in another country (such as India).
There are a multitude of options to consider, such as where you intend to retire, whether you will return to the UK to work, and what your investment objectives are in relation to your pension fund.
There are, essentially, four different options: a) leave the pension with the NHS scheme in the UK; b) transfer your UK pension to a QROPS scheme in Australia, c) transfer your pension into an Indian based QROPS scheme, or d) transfer the NHS pension into an overseas scheme such as Malta. We will cover each of these options below:
Keep your NHS pension where it is
In the past, before overseas QROPS schemes became more mainstream, this was a popular option for Indian doctors who had either returned to India with the NHS pensions, or emigrated to Australia. The NHS scheme offers a guaranteed a pension for life, and then after you die, your spouse is entitled to half of your pension for the rest of their life.
By most standards, this pension was very hard to beat, and compared with many other pension schemes, it is still offers members a lot of valuable benefits.
However, the obvious downside is that you will have to wait till you are 60 to access the benefits. And then after you and your spouse have died, there is no fund to pass on to your children, as opposed to an overseas scheme based in Malta or Gibraltar.
In addition, there is no 100% guarantee that your pension will still offer the promised benefits when you are 60 – which may be 20 years away or more. The government has already made significant changes to the scheme for new members, with members of the ‘2008 section’ having to wait until they are 65 before they are entitled to their pension. And benefits will be further eroded in 2015, when the ‘CARE’ scheme comes into effect (or ‘Career Average Revalued Earnings’ scheme, to give it it’s full name).
The pattern is clear – the government has devalued the NHS pension scheme for all new members. However, there is now a clear and obvious risk is that the government will now come after those existing members who have very expensive final salary schemes from the 1995 section.
Consequently many members see the writing on the wall, and do not want to risk waiting 20 years hoping that the government does not get their hands on their pension.
Transfer your NHS pension into an Australian QROPS scheme
If you intend to stay in Australia during your retirement, then there may be some advantages of transferring your UK or NHS pension into a QROPS scheme based in Australia. For example, pension income in Australia from Australian pension schemes is taxed very favourably, and there is very often little or no tax to pay.
Secondly, a transfer of a UK pension into an Australian QROPS may help to increase age pension entitlements, which can become very valuable in retirement. In addition, there is a lot of flexibility in relation to how pension funds can be accessed at retirement.
However, if you are not 100% sure that you intend to stay in Australia for the rest of your life, then there can be a number of very significant risks and drawbacks in transferring your pension into a scheme based in Australia.
For instance, if you do subsequently become a non-resident of Australia – for example if you move back to India to retire – then there can be some very harsh tax penalties on any income drawn from your pension.
For these reasons we generally do not recommend clients to transfer their UK pension into an Australian domiciled QROPS scheme, unless they can demonstrate that they have strong ties to Australia (such as existing family who are based there), or who are 100% sure that they will spend the rest of their life in Australia.
Transfer your NHS pension into a local India QROPS scheme
Up until very recently, most Indian nationals returning to India transferred their UK pension into a QROPS scheme based in India, such as LIC, HDFC Life, or SBI. However, over the past 6 to 12 months, we have seen a significant move away from clients wishing to transfer their pension to an Indian QROPS, with more returning Indian choosing to transfer their UK pension into a more flexible overseas options, such as Malta or Gibraltar.
There are several reasons for this. The first is that many QROPS schemes in India have been banned – today, there are only 12 schemes which are currently approved by HMRC, and this list is likely to get smaller in the coming weeks and months. Starting with the banning of the LIC Jeevan Akshay scheme in 2013, and followed up with the delisting of over half of the Indian QROPS schemes in July 2014, transferring your NHS or UK pension into a local Indian QROPS is a high risk strategy.
Alongside the negative press of local QROPS schemes in India, there has been an increased awareness of the advantages of transferring a UK pension into a scheme based in a robust, safe jurisdiction such as Malta. For most residents of India, or residents of Australia who may one day return to India, a transfer to a QROPS scheme in Malta is a much better alternative.
Transfer your pension into a Malta QROPS scheme
Despite what some Australian pension advisers will tell you, there is no requirement or obligation to transfer your NHS pension into an Australian scheme. In fact, as mentioned above, for most Indian nationals, it would be considered negligent advice.
For NRI’s and Indian nationals living in Australia, a far better option would be to transfer your UK or NHS pension into a flexible QROPS arrangement such as Malta. The benefits include the ability to withdraw up to 30% of your pension tax free, access to your pension from the age 50, the ability to pass on your remaining pension fund to your beneficiaries, and a much wider choice of investments.
Malta QROPS – complete flexibility for Indian nationals living in Australia
A QROPS scheme based in Malta is completely mobile – meaning that wherever you move to, your QROPS moves with you – with no penalties, tax charges or any other costs to pay. So if and when you decide to move back to India, you don’t need to worry about your pension.
In addition, there is complete flexibility with a Malta QROPS pension plan in relation to subsequently transferring your Malta pension across to a QROPS based in another jurisdiction should your circumstances change.
For example, if you do eventually retire in Australia, then if the tax rules in Australia at the time offer a QROPS based in Australia better benefits that may not be offered by a scheme in Malta, then you can simply transfer out of your Malta QROPS into an Australian scheme.
There is therefore no reason to transfer your pension into an Australian QROPS scheme until you are ready to draw down your pension income – a Malta QROPS scheme will give you all the benefits, without the restrictions.
Beat the ban – transfer your NHS pension before April 2015
Transfers from NHS pensions into QROPS schemes will be banned from 5 April 2015. Hence it is critical that you start the transfer process immediately. If you are currently living in Australia, or will shortly be moving to Australia, and are a member of the NHS pension scheme, please contact us immediately for a free consultation.
Help for Indian doctors living in Australia
QROPS Adviser Group can help doctors and other healthcare professionals working in Australia make the right decision about their UK pension. For more information, please contact us.
For more information about QROPS schemes in general, or for a free, no obligation consultation in relation to your UK pension, please contact us
Have you returned to India and still have your NHS Pension? From 2015 you will no longer be able to transfer your NHS pension to a QROPS plan as a result of a UK government ban on NHS pension transfers – meaning you will have to wait until you are at least 60 before you can draw an income or take a tax free lump sum – as opposed to 50 under a QROPS pension.
For a free consultation on how you can still transfer your NHS pension into a QROPS pension plan before the deadline expires, please contact us immediately.